As Michael Corleone said in the “Godfather II” movie: “Keep your friends close and your enemies closer.” As it turns out, those words were not only prescient for the Corleones, but they’re also relevant for the far more modern world of payment fraud. Because sometimes, what can appear to be a friendly customer is actually an enemy in disguise. Such is the ever-expanding world of friendly fraud.
As Kount Vice President and Senior Customer Experience Leader Rich Stuppy told PYMNTS in a recent conversation, friendly fraud is another burden in an unusually difficult year. As consumers moved to digitally pivot and merchants upped their digital game by adding features like online ordering, delivery and curbside pickup, fraudsters proved to be willing and enthusiastic to go along for the ride.
“There are now multiple attack vectors going on here,” Stuppy said. There are simple, old-school fraud methods, but lately, it gets a lot more complicated. One of the unique scams Kount follows is the “pizza plug,” wherein a consumer is offered the ability to buy $100 worth of food for a much smaller charge, usually on a social media platform like Facebook or Twitter. Whether the buyers consciously realize it or not, noted Stuppy, they are part of a fraud in progress.
“And what happens is, they’ll pay the money and place the order. And then the charge goes either to an account that was taken over or to a new account that was created with a stolen card – it happens a lot of different ways,” he explained.
No matter how it goes, the restaurant‘s outcome is always the same: They are on the hook for the bad sale, out the product and the money. But among all the fraud vectors out there, said Stuppy, friendly fraud in all its myriad forms is often the most insidious and the hardest to combat. When a customer calls up and says they never got a package they did receive or that their order was incomplete or charges on their card they don’t recognize, that will end in a refund or a chargeback. It’s a great solution if the claim is legitimate — but it’s a major source of loss for retailers when consumers are taking advantage of the customer-friendly chargeback process in an attempt to get something for free.
And friendly fraudsters, once they get away with it once, tend to try it again and again.
The good news, said Stuppy, is that they can be stopped — but it does require more work. On the issuer end, that can mean better post-dispute resolution services. Stuppy mentioned “conscience API (application programming interface)” to help remind consumers that friendly fraud can be pinpointed by looking carefully at the data — it’s not quite the invisible crime it has historically been.