Advice to Merchants — Be Proactive to Avoid Chargeback Losses


There’s nothing friendly at all about so-called friendly fraud — a term that describes the practice of fraudulent chargebacks. Chargebacks occur when banks force a refund for a disputed credit card purchase. They were produced as a form of protection allowing for consumers to file a complaint and streamline returns for wrongful transactions. But chargebacks have become a problem for merchants, with consumers wrongfully taking advantage of regulations aimed at protecting consumers by getting refunds for merchandise they received.

With the growth of mobile purchases and great increase of online shopping friendly fraud follows surges or increased spending. Monica Eaton is the co-founder of a dispute-mitigation firm that helps merchants avoid friendly fraud and recover revenue lost to such transactions. In an article on, Eaton explained that at times, consumer misunderstanding is part of the problem. Some mistakenly believe filing a complaint that generates a chargeback is just a faster resolution alternative to contacting the merchant for a refund.

Chargebacks can be harmful to merchants by either burdening them with disputing a wrongful chargeback or costing them lost funds. Easton recommends excellent 24/7 customer service as the best tool for merchants to counter friendly fraud and shares the following list of steps merchants should take to protect themselves from fraud.

  1. Employ best practices. Follow rules and regulations set forth by payment networks.
  2. Use Address Verification Service (AVS) to help reduce risk in card-not-present transactions.
  3. Request card security codes.
  4. Sign up for 3-D Secure.
  5. Improve customer service to appease unsatisfied customers.
  6. Identify and tackle threats early via a risk management plan.
  7. Balance security with customer experience – don’t let security get in the way of a smooth and speedy customer experience.
  8. Create a blacklist. Once you encounter friendly fraudsters, don’t let them shop with you again.
  9. Manage recurring payments – as recurring payments are also easy targets for friendly fraud.
  10. Address potential issues associated with shipping.
  11. Talk about delays and discontinued merchandise.
  12. Use delivery confirmation for big-ticket items.
  13. Check billing descriptors.
  14. Monitor the sales of digital goods.
  15. Challenge with confidence.

Protect yourself from consumer chargeback abuse.

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