Risk & Compliance
Friendly Fraud
Definition
Friendly Fraud chargebacks filed by legitimate customers who received goods or services but dispute the charge anyway. Also called first-party fraud or chargeback fraud. Common scenarios include buyer's remorse, family members making unauthorized purchases, or customers not recognizing billing descriptors. Represents 60-80% of chargebacks in some verticals. Prevention requires clear communication, recognizable descriptors, and good customer service.
Related Terms
Chargeback
A transaction reversal initiated by the cardholder's bank after a dispute. Chargebacks return funds to the cardholder and impose fees on the merchant (typically $25-100). Common reasons include fraud, non-delivery, product issues, and billing disputes. Excessive chargebacks trigger monitoring programs and can result in account termination. Prevention is always cheaper than fighting chargebacks.
CNP Fraud (Card Not Present)
Fraudulent transactions where the physical card is not present, typically in e-commerce. Includes stolen card credentials, account takeover, and synthetic identities. CNP fraud rates are significantly higher than card-present fraud because the merchant cannot verify physical card possession. Prevention relies on AVS, CVV, 3DS, device fingerprinting, and fraud scoring.
Billing Descriptor
The merchant name and information appearing on cardholder statements. Clear, recognizable descriptors reduce 'I don't recognize this charge' chargebacks. Typically limited to 22-25 characters. Can include dynamic elements for clarity. Some PSPs allow 'soft descriptors' that differ from the merchant's legal name. Poor descriptors are a leading cause of friendly fraud.
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