Intelligence to manage risk

Ecommerce & Friendly Fraud: A Complete Guide

What Every Ecommerce Business Owner Should Know

Whether you're unfamiliar with friendly fraud or your business has fallen victim to it, this guide can help.




Often referred to as “innocent fraud,” friendly fraud has become one of the biggest thorns in ecommerce businesses’ sides. 

Friendly fraud happens when a customer disputes a legitimate order for one reason or another. As a result, companies are subject to unnecessary chargebacks.

It’s critical to understand what friendly fraud looks like and what you can do to prevent it from happening.

What Is Friendly Fraud?

Friendly fraud happens when a customer places a legitimate order, receives the product or service, and then files a dispute with their bank or credit card issuer. It’s one of the toughest fraud types to prevent because quite often, friendly fraud is “innocent.” 


What does friendly fraud look like?

Friendly fraud is frequently the result of a mistake on the customer’s end. For example:

The customer forgets they agreed to a recurring payment, such as a software or magazine subscription.

Another family member authorizes the purchase without the customer’s knowledge.

The customer misreads product description information or shipping details.

The company name on the credit card statement isn’t immediately recognizable — typically because it’s a parent company or DBA — so the customer doesn’t recognize it.

So, why wouldn’t the customer just contact the company?
Unfortunately, customers misunderstand or are unaware of a company’s return and/or refund policy. So, instead of calling customer service or requesting a return, the customer goes directly to their bank or credit card company to dispute the charge.

This initiates the chargeback process.

Unfortunately, friendly fraud accounts for a growing number of chargebacks.

Friendly fraud is on the rise

During the pandemic, ecommerce consumer spending was fueled by a number of factors, including necessity, boredom and the injection of cash via economic relief programs. Consumers had more money to spend.

In addition, people who had never bought anything online before were introduced to a whole new shopping channel with a steep learning curve. It was all too common for customers to forget they made purchases, disregard product descriptions and misunderstand shipping policies. As a result, friendly fraud increased.


Between 2019 and 2022, online businesses reported a 28% increase in friendly fraud.

Now that we’ve entered the post-pandemic era, consumers have limited disposable income and are concerned about a possible recession. The financial stress can lead them to exploring alternative ways to save and even make more money — making friendly fraud an attractive option, but not necessarily the “innocent” kind.

Chargeback Fraud: Friendly Fraud’s Evil Twin

Chargeback fraud is similar to friendly fraud in that it starts out with a seemingly innocent transaction: A customer makes a purchase and receives the product. From there, things can go awry:

The customer experiences buyer’s remorse for a high-priced purchase but is embarrassed to give that reason for a return.

The customer is hiding a purchase from their partner or joint account holder.

The customer wants to lower their credit card balance.

The customer forgets to cancel a recurring purchase.

The customer misses the time window to return a product.

The customer simply takes advantage of the chargeback process with the intent of getting free products. 

A whopping 86% of chargebacks are deemed fraudulent. Worse, 40% of customers who file one fraudulent chargeback will file another within 90 days.

Chargeback fraud has become so pervasive, the FBI views it among the largest problems in ecommerce. Why? Because they hit businesses in the bottom line.



Chargebacks are costly

Chargebacks cost online businesses around $125 billion, with every $100 lost in chargebacks translating to $240 in actual losses. Here’s how that adds up.

Typically, the fees associated with chargebacks cost companies between $50 and $100 per transaction. And because chargeback processing time ranges between six weeks and six months, the product or service has already been delivered. That means companies also lose the value of the product, plus shipping and handling.

Another loss relates to the time employees spend collecting the proof of purchase and building a case to dispute the chargeback. For small businesses with limited staff, it’s nearly impossible to defend themselves against fraudulent claims.

If the company has too many chargebacks, the bank or card issuer may charge even higher fees or prevent the company from accepting credit card payments altogether. Card issuers like Visa are making it easier for businesses to avoid this path. 


Understanding Visa’s Friendly Fraud Rule

Visa’s new rule is designed to help businesses dispute chargebacks related to friendly fraud. Specifically, it allows them to submit more evidence during a dispute and even allows “pre-dispute” data submission as long as it’s provided within seconds of the transaction.

Ultimately, the best way to fight friendly fraud is to prevent it from happening in the first place.

How to Prevent Friendly Fraud

Companies need to put themselves in their customers’ shoes and anticipate how they might misread and misunderstand the purchase process.

  • Establish and maintain exceptional customer relationships.
  • Confirm orders through multiple channels.
  • Clearly communicate shipping and delivery information.
  • Require signatures at delivery for high-value orders.
  • Make getting in touch easy.
  • Ensure clarity on bank and credit card statements.
  • Keep customers informed.
  • Make policies prominent.
  • Clarify subscription policies.
  • Focus on clarity throughout the entire store.

Customers remember a great first impression. Make the shopping experience memorable and foster trust so customers will default to asking questions about a purchase instead of disputing a charge. 


The best way to make sure a customer remembers they made a purchase is to send multiple confirmations to customers, especially through the channel they prefer. Include email, text, and in-app confirmations, if possible. 


Shipping and delivery are big issues with customers. If they don’t know when to expect their products or they expected their products sooner, there’s a higher likelihood that they’ll assume the worst. Make sure to provide clear expectations about delivery dates to give customers peace of mind.


High-value items are among the most likely to be stolen or be involved in a fraud scheme. By requiring signatures for deliveries, especially high-value orders, companies can make it harder for a customer to deny receipt.


Offer multiple ways for customers to get in touch — phone numbers, email addresses, social media pages, chatbots — and make sure customer service can handle complaints efficiently.


Consider the business name that displays on a customer’s bank or credit card statement. Ensure the description won’t confuse customers – at the very least, let customers know what name they should expect to see on statements.


From the time the order is placed to when customers receive satisfaction surveys, stay in contact. Send order updates with shipping and tracking information so customers know where their merchandise is every step of the way.


Make sure that customers can easily find cancellation, refund, and return policies, as well as shipping information. These should be clearly stated on the website, receipts emails, texts, and even consider pop-up notifications as they apply.


Subscriptions are fodder for friendly fraud. Review subscription policies to make sure they’re clear, including the cancellation process. 


Review product descriptions to make sure they’re clear and accurate. Invest in high-definition photos of products with 360-degree views and the ability to zoom in to see details. Any place where there is even a potential for misunderstanding should be examined and clarified.

How ClearSale Helps Businesses with Ecommerce Risk Management

At ClearSale, we have a global lens and large database that allows us to help clients eliminate fraud threats and prevent chargebacks, while approving more orders, faster. And our knowledge of fraud patterns and trends stems from the longest history in the industry and an unmatched global experience fighting fraud. We’ve worked with businesses around the world in some of the most high-risk regions and industries.

Our massive transaction database is constantly learning as more orders are processed, and we can see the impact fraud has on diverse markets. This makes it easier for us to identify fraud trends as soon as they emerge and use those insights to make more accurate decisions.

Machine learning/AI

All orders are screened using artificial intelligence and machine learning to process transactions and fine-tune fraud models based on customer behavior. Each order is assigned a fraud score. Orders with a score that meets customer-specific thresholds are automatically approved. Orders with a score that makes them questionable or suspicious are flagged for further review.


Contextual fraud review

Our data scientists and fraud analysts perform secondary reviews of suspicious and questionable orders. They use their expertise and understanding of fraud trends — while sharing that information with the client’s team – to determine if a transaction is valid or not. And, if a company so chooses, our analysts can pleasantly and very diplomatically reach out directly to customers to confirm they made the purchase — all the while, training your team to do the same.

Interactive client dashboard

An interactive dashboard allows clients to review all orders and contribute to contextual review with information about VIP clients and orders that should be automatically approved in the future. Clients also utilize the dashboard to track chargebacks on approved orders, making it easier for ClearSale’s end-to-end chargeback management team to dispute and deliver a resolution.


Post-processing audit

Machine learning/AI can also be used post-processing to validate decisions and help find patterns to be aware of moving forward. For instance, our auditing program offers a safe test environment where we analyze random sets of declined transactions to see what would have happened if we had approved the orders. This enables us to measure the accuracy of our client’s automated rules and fine-tune them as needed.

Chargeback management

Through our partnership with enterprise chargeback management service provider ChargebackOps, ClearSale offers full-scale chargeback management:

Total Chargeback Protection allows businesses to recoup a portion of losses due to fraudulent transactions.

Chargeback Guarantee reimburses the transaction amount plus the chargeback amount for any unauthorized transaction that’s approved.

End-to-End Chargeback Management delivers comprehensive chargeback mitigation and resolution services, including team training, data audits and timely responses to issuers.

The Clear Choice for Ecommerce Fraud Protection