'Friendly fraud' isn't so friendly. Here's how banks can fight back

First-party fraud, often called 'friendly fraud,' is hitting merchant bottom lines harder than ever. This happens when a customer makes a legitimate purchase but later disputes the charge with their bank to get a refund while keeping the product. For retailers offering financing or accepting credit cards, this isn't just a bank problem—it’s a direct hit to your revenue and inventory. Rising inflation and economic pressure are driving more consumers to exploit the dispute system, viewing it as an easy way to cancel a 'buyer's remorse' purchase. To protect your business, you need to tighten your documentation. Banks are increasingly looking for 'compelling evidence' to side with the merchant. This means you should maintain clear digital footprints: delivery confirmations, IP addresses for online checkouts, and signed contracts for financed big-ticket items. Communication is also your best defense. Often, a customer files a dispute because they didn't recognize the business name on their bank statement or couldn't easily find your return policy. Ensure your billing descriptor matches your brand name and make your refund process visible. By proactive management, you can prevent these disputes from turning into permanent losses.

Source: American Banker — Top News

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