Friendly Fraud - A Very Real Problem

According to a LexisNexis Risk Solutions Study, retailers lose about $139 Billion to fraud a year, and the problem isn't getting any better. The LexisNexis “fraud multiplier,” which calculates the “true” costs shouldered by merchants, reported that merchants paid $2.70 for every $1 lost in 2012, up about 20% from 2011 in fraudulent transactions.

Friendly fraud accounted for about 25% of fraud affecting businesses or individuals that process credit cards. Friendly fraud is the term used to describe a fraud that occurs when a consumer purchases an item, receives it, but claims they did not, and then requesting a refund or chargeback from the merchant or delivery of a duplicate item.

According to CyberSource’s 2012 Online Fraud Report merchants reported that although there was a 33% decrease in the percent of orders lost to fraud in 2011 but still, 60% of merchant’s perceived friendly fraud to have increased over the past two years.

In addition, according to FFA UK about 65% of all credit card fraud in 2011 was from card not present transactions. Source: Fraud the Facts 2012.

So, based on the study alone, friendly fraud accounted for about $28 Billion of the total fraud, and this doesn't account for the additional chargeback fees incurred, rate hikes, and the time and money you have to spend to fight it.

Watch Clark Howard's video on Friendly Fraud to learn more. Clark Howard Video

There are ways you can protect yourself from this form of fraud, and our solutions page has ways to help you resolve the issues.

 

Download the LexisNexis True Cost of Fraud Study 2012

Download the LexisNexis True Cost of Fraud Study 2011

Download the LexisNexis True Cost of Fraud Study 2009

Download CyberSource’s 2012 Online Fraud Report

 

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