Fraud

What is friendly fraud?

A type of first-party fraud where a legitimate cardholder makes a purchase and then disputes the charge, claiming it was unauthorized. Friendly fraud is distinct from true chargeback fraud in that the cardholder may genuinely believe the dispute is valid (e.g., forgetting a purchase or not recognizing a merchant descriptor), though the term is also used for deliberate abuse. It is a leading cause of merchant losses in e-commerce.

How it works

Example: A consumer subscribes to a streaming service, forgets about the recurring charge, and disputes it with their bank as unauthorized. The merchant loses the revenue and is charged a chargeback fee despite the subscription being legitimate.