A growing number of chargeback cases are brought by cardholders who initiate a dispute on a legitimate online charge and claim it’s fraudulent. This is known as first-party misuse or friendly fraud.

One-third of merchants globally said they have experienced friendly fraud, and they can negatively impact your bottom line. The estimated cost for a business to manage friendly fraud is $35 for every $100 in disputes, according to a recent Verifi white paper titled Sizing Up the Impact of CNP Fraud Disputes.*

According to the Verifi white paper, reasons people initiate a dispute on an online purchase that constitutes friendly fraud include the following:

  • They are confused by the transaction description or amount on their statement.
  • The cardholder is attempting to return goods outside your company’s return period.
  • The quality of the product received was not as expected.
  • They have buyer’s remorse.
  • They want to obtain free goods or services.

There are several ways to engage with your customers online in a way that can help lead to fewer disputes.

  • To avoid confusion, provide clear online descriptions and photos of your products or services.
  • Keep customers informed through the order-to-deliver process.
  • Use clear payment descriptors so customers recognize a transaction on their card statement.
  • Make cancellation and return policies clear and easy to find on your website.
  • Include “click to accept” with your cancellation policies before cardholders can check out on the website.
  • Obtain a CVV code from the payment card, and use multifactor authentication for account logins to be sure the cardholder and account holder are the rightful card owner.
  • Use an Address Verification Service (AVS). If the shipping address matches the address on file with their card issuer, there is a lower chance the cardholder didn’t receive the goods.
  • Avoid technical errors and follow card network regulations to help ensure both you and the customer have complete information about each e-commerce transaction.

In general, attentive customer service and clear communication can prevent chargebacks from happening. When customers who are dissatisfied with a purchase know they can easily get assistance from the business, they’re less likely to take their complaint straight to the card-issuing bank.

This article was originally published in Elavon’s Payment Smart newsletter. The Washington Hospitality Association’s payment processing program is backed by U.S. Bank/Elavon.