Friendly fraud happens when consumers request a chargeback from the bank rather than a refund from the merchant. This practice is very damaging for merchants, often resulting in severe fines and penalties. Since chargebacks are meant to be a consumer protection mechanism there is little oversight and often never any investigation into the legitimacy of the claims a consumer makes.
Our society is dependent on instant gratification. For many cardholders, a chargeback is viewed as the no-hassle, money-back solution they’re looking for. In fact, more than 80% of chargebacks are actually cases of friendly fraud. Visa reports annual credit card transactions total more than $2 trillion. Of that, $765.9 million worth of transactions are disputed. In the end, friendly fraud costs merchants $11.8 billion annually (or $3.08 per dollar of fraud).
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