Friendly Fraud Gaining Attention in Pandemic

Friendly Fraud Gaining Attention in Pandemic

March 4, 2021

Professionals in the close-knit community of e-commerce fraud fighters are used to toiling mostly in obscurity, so when the general public is made aware of the concerns of that group, it’s notable. Friendly fraud, a significant area of concern for fraud departments, gained national attention this week when its deleterious effects spilled into the mainstream media.

A Los Angeles Times report was picked up by CBS News when a popular L.A. restaurant closed because of what the report called “high-tech dine and dash,” but what is clearly known to fraud fighters as friendly fraud.

Friendly fraud surged during the economic distress of the pandemic, just as it did when the term was coined a decade ago amidst the devastation of the 2008 financial crisis. Restaurants, many of which were new to e-commerce and to friendly fraud, were a real area of growth for the tactic as they rushed to provide their services during Covid-19 induced lockdowns.

The Times report focused on a popular Korean fusion café called Spoon by H and the effect friendly fraud had on the business. The restaurant began experiencing a surge of friendly fraud chargebacks—once losing out on a $700 order, the eatery’s largest ever.

"He came and he picked up the food, and then one week later he disputed the charge," Yoonjin Hwang, owner and chef of Spoon by H said. She told the Times she lost the food and the money and it kept happening over and over.

"I just felt so incredibly helpless and frustrated,” said in the Times interview, echoing the experience of many in e-commerce. “We just couldn't keep running our business like this," she said.

According to the report, in the face of a harsh environment for restaurateurs and a form of fraud that was unfamiliar to her, Hwang made the decision to close the restaurant permanently.

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