Online Retailers See "Friendly Fraud" Rise Sharply

Source: Wall Street Journal
Businesses Get Tougher on 'Friendly' Fraud - WSJ.com

Online merchants are fighting a surge in so-called friendly fraud, as more consumers try to get out of paying for their Internet purchases in the recession. 

Online jeweler Ice.com Inc. and travel site Expedia Inc. are among companies seeing at least 50% spikes from October in friendly fraud, a term used to describe when a consumer disputes an online charge but doesn't return the item or has already used the product. 

(Editor's Note:  I think they should come up with a better name for it than friendly fraud.  Maybe something like theft?)

Common scenarios include consumers falsely claiming they never received a product or they received the wrong item. Other consumers deny they ever authorized the charge and refuse to pay...

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Editor's Note II: For those of you not familiar with the process, when a chargeback does occur, regardless of what the merchant did to verify the transaction, the merchant will always be responsible.

Some Merchant Service Providers will tell the unfortunate merchant that if you  receive an AVS match, you are fine; but in fact, that’s not true.

The challenge with “friend fraud” is simply that there is no way to verify the authenticity of the transaction.  While the transaction itself was legitimate, it is the consumer who isn't and it becomes a he said/she said scenario.   While “technically” the consumers themselves are committing fraud in this case, law enforcement feels that successfully prosecuting these crimes would be too expensive.  

However...there is a way to "prevent" friendly fraud.  Insist that your customers use a HomeATM PCI 2.0 Certified PIN Entry Device.  Hard to say: "It Wasn't Me"  when a PIN is involved...which is why PIN based transactions have virtually ZERO chargebacks.  As an added benefit, our device would get rid of "unfriendly fraud" too!  Oh, AND lower your interchange rates to "card present" and TRUE PIN Debit rates.  What is TRUE PIN Debit?  See the "related article" below.

friendly fraud, chargebacks, online retailers, i didn't do it

Related article

• Software PIN Debit Doesn't Exist (pindebit.blogspot.com)