What is Friendly Fraud and How to Prevent It?

When the pandemic happened, a lot of company owners adjusted their systems to function well. Businesses have had to act quickly in this kind of situation following the usual protocols or due diligence. Many workers are working remotely without supervision or security and are under more stress, making them more fragile while working. This increases the chances for fraudsters to attack. Companies without an effective anti-fraud program, and adequate cybersecurity, face more significant compliance risks such as legal action or regulations. If not fines, institutions face situations such as loss of trust from their consumers affecting their current sales.

Meanwhile, while all these are happening, some business owners do not realize how they can combat this until they experience them first-hand. But that doesn’t mean they need to suffer from this, since they can prevent this by using strong authentication solutions such as FIDO webauthn or other robust solutions. 

Friendly fraud

Friendly fraud is also happening in the business sector, when a cardholder reports or questions a debit or credit card charge, either by mistake or with malicious intent. Friendly fraud is not actual fraud and occurs when cardholders report unauthorized credit card use through the chargeback system.

A customer may be honest and not commit friendly fraud if they make a mistake in a purchase or forget about the transaction. Another possibility is that several people share a card, and the user fails to report card activity to the merchant, making it appear to be friendly fraud.

Aside from utilizing biometric digital identity verification features, there are other ways to prevent friendly fraud. When it comes to chargebacks, you can prevent it from being reported; companies can employ real-time fraud prevention methods like managed services and collaboration with card issuers. 

The company can provide detailed information to the customer about the transaction once it has detected a possible chargeback. The merchant can quickly clear up any confusion and prevent customers from making fraudulent claims to avoid being charged. They can also employ 3D secure protocols to add debit and credit transactions security.

To know more about this matter, you can continue reading this infographic from LoginID.