While the early stages of the pandemic may have pushed e-commerce retail purchases up 81 percent, it also brought some new realities for consumers and retailers alike.

One of the new normals was shipping delays. As more merchants were forced to shift to digital commerce to stay afloat, they were in the lucky position of having extra time to get things out. However, many were so focused on fulfilling orders that they became easy prey for fraudsters.

Scammers were having a field day with the newfound opportunity. Consumers reported $3.3 billion in fraud and identity theft losses in 2020 — nearly double from 2019 — according to the Federal Trade Commission.

Enter “friendly fraud”

Many of those consumer losses came at the hand of something called “friendly fraud” (a.k.a. accidental fraud). Friendly fraud works in three ways:

  • A consumer makes a legitimate purchase but doesn’t recognize the charge when it appears on their bank statement. At that point, they call their bank or credit card company to dispute what they think is a fraudulent charge.

  • A primary cardholder isn’t told when someone else on their account makes a purchase. They then mistake it for fraud and report it as abuse. This can often happen when spouses share an account.

  • A consumer makes a legitimate — but unauthorized — purchase. This type of accidental fraud is fairly common in the gaming industry when children use their parents’ credit cards to make in-app or in-game purchases. While the purchases are legitimate, the cardholding parents might not recognize the charge and contact their bank or credit card company to dispute the charges. While Facebook isn’t in the gaming industry, it has also been accused of “friendly fraud.”

Mind you, not all cases of friendly fraud are accidental. Experts at Kount, an Equifax-owned company specializing in fraud prevention, say customers often commit intentional friendly fraud when they find ways to keep products without paying for them.

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