Friendly fraud, also known as chargeback fraud or first-party fraud, occurs when a legitimate cardholder makes a purchase from a merchant, receives the goods or services, but then contacts their issuing bank to falsely dispute the charge and demand a refund (chargeback).
Why Do Consumers Commit Friendly Fraud?
Unlike true fraud (where stolen credit card details are used by a hacker), friendly fraud is initiated by the actual customer. It often happens because the customer experiences "buyer's remorse," forgets about a recurring subscription, fails to recognize the merchant's billing descriptor on their bank statement, or simply wants to get an item for free.
The Threat to the Merchant Portfolio
Friendly fraud drives up a merchant's chargeback ratio unfairly. If left unchecked, excessive chargebacks will result in the merchant being placed on the MATCH list, and the acquiring bank facing steep penalties from the card networks.
Analyzing Real-Time Sentiment with Onlayer
Often, a spike in friendly fraud is preceded by poor customer service or confusing billing practices. Onlayer analyzes public reviews across 50+ external platforms, including Trustpilot, Yelp, Google Reviews, and App Stores. By delivering sentiment-based alerts directly to your risk teams, Onlayer enables risk-adjusted portfolio scoring, allowing you to catch problematic merchant behavior before it results in massive chargeback spikes.
