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Education

ted by customers, sometimes the perpetrators are legiti- While it is true that friendly
mate customers who are simply confused and making a
mistake. However, more often they are criminals who are fraud is most commonly committed
intentionally working the system to get products and ser- by customers, sometimes the
vices for free. For individuals, friendly (familiar) fraud is
always perpetrated by someone the victim knows. Wheth- perpetrators are legitimate
er it is a parent, child, sibling, coworker or next-door customers who are simply confused
neighbor, this kind of fraud comes from a source in your
social circle. When the perpetrator of this type of fraud is and making a mistake.
exposed, the victim will know the criminal by name.

How common is friendly fraud? • A customer requesting a chargeback due to their
own confusion: Although fraud is fraud, some peo-
Businesses of all sizes are currently being impacted by ple do unknowingly commit friendly fraud. When
friendly fraud, and it is a growing concern across all
industries. While a larger company may be able to easily customers are confused about their purchase, they
might request a chargeback, even if they received
absorb acts of friendly fraud and the associated losses,
smaller businesses may struggle to do so. Unfortunately, the product or services as described. This can be a
point of particular frustration for companies. Cus-
it is already negatively impacting many small to midsize
businesses. tomers will blame the company and dispute the
charge, even when the company has done nothing
wrong.
Experts believe that as much as 60 percent of chargebacks
are cases of friendly fraud (see http://tinyurl.com/3aj5bdyd). • A customer disputing a charge when a friend or
And as shocking as it may seem, familiar fraud happens relative used their payment details: In this case,
at a much higher rate than you would think. The Identity familiar fraud will cause the victim to set a charge-
Theft Resource Center found that familiar fraud is back in motion, not knowing the company delivered
impacting 500,000 children and 2 million seniors in the goods and services in good faith. But the recipient
United States alone (see http://tinyurl.com/4hc838sr). was a friend or loved one who illegally used the vic-

How does friendly fraud affect businesses? tim's payment information without them knowing.
So the cardholder ends up being both an unwitting
The following examples of friendly fraud can show exactly perpetrator of familiar fraud and the victim of fa-
how damaging these acts are for businesses. miliar fraud.
• A customer abusing chargebacks to receive a re- If someone is certain they didn't make a charge that
fund when products or services were rendered: shows up on their account, it's natural for them to
This is the most common trend happening to busi- suspect fraud and dispute the charge. It might not
nesses right now. Criminals will place an order for occur to them that their information was stolen by
a product or service, wait until they receive it, then someone they know. Regardless, the company will
dispute the charge with their credit card company. still lose money, even though it did nothing wrong.
When this happens, the business loses out on the
money, even though the company very clearly pro- Businesses are able to sell products and services directly
vided the product or service in question. to their customers through online payment gateways. Yet
in the same way a shoplifter may snag something off a
In these types of cases, the individuals committing store's shelf, criminals steal from businesses through clear
fraud will often lie to their banks. They will claim acts of fraud online.
the product never showed up, or they may say that
the product was not what they wanted at all and that This growing trend is harmful, but companies increasingly
they were deceived when they made a purchase. are working to navigate these challenges. As long as
businesses adapt and take preventive measures when
• A customer claiming a company is refusing a re- documenting their sales, they can push back on this form
fund without requesting one: This scheme includes of fraud.
making up fake interactions with the company be-
ing targeted. Fraudsters will go to their bank and
claim that they requested a refund and that the Nicholas Cucci is the co-founder and COO of Fluid Pay LLC. Cucci is also
company is refusing the request. Often, this claim a graduate of Benedictine University and a member of the Advisory
is made without the criminal ever having contacted Board and Anti-Fraud Technology Committee for the Association of
the company in question. Nevertheless, it is the ex- Certified Fraud Examiners, as a CFE himself. Fluid Pay is the ONLY 100
cuse they use with their bank when requesting the percent cloud-based Level 1 PCI Payment Gateway processing transac-
chargeback. tions anywhere in the world. Contact Nick at Nick@FluidPay.com.

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