Forty percent of online merchants say friendly fraud has been a bigger problem in 2020 compared to the year before, according to a new report. Antifraud technology provider Ravelin’s Online Merchant Perspectives, Fraud & Payments Survey 2020 also found that, for the chargebacks resulting from that and other types of fraud, there were significant differences in successfully challenging them depending on the payment method.
Merchants have had little success challenging chargebacks when consumers made the purchases using Apple Pay or Google Pay, the report says. Only five percent of those polled said they were most successful challenging these types of chargebacks. In contrast, 48 percent said challenging credit card chargebacks produces the best results.
The term “friendly fraud” was coined during the financial crisis in the late 2000s when merchants began seeing more consumers taking advantage of permissive payment card network rules around fraud claims. Many observers blamed the dire financial conditions consumers found themselves in for the advent of this type of fraud. The economic disruption of 2020 has again thrown many consumers into uncertain economic situations.
“Thanks to Covid-19 and contactless delivery for products, friendly fraud has been on the rise for the past few months,” said Mairtin O’Riada, co-founder and CIO at Ravelin. “And Google and Apple Pay’s biometric security features don’t stop friendly fraud. It’s costing merchants a huge wad of cash at a time when profit margins have become wafer thin. The key to fighting this issue is to keep a closer eye on your own payment data. If you can track payment method types, the issuer country, loyalty scheme points and BIN ranges, you can begin to start to challenge chargebacks with more confidence and success.”