Merchants finally getting a chargeback break?

Friendly fraud is one of the most frustrating expenses a business owner will ever deal with. Friendly fraud is when a customer utilizes the credit card chargeback system to get a refund on a completely legitimate and honest purchase. It most often occurs in online business as it is very difficult for a business to win chargebacks, especially chargeback codes 53 and 4853, item not as described. “Item not as described” is such an ambiguous reason that a customer can request a chargeback, it’s simply unfair and often abused.

Traditionally, merchants receive zero benefit-of-the-doubt from card issuers when it comes to chargebacks, mainly because issuers make much more money from their card holding customers than from the merchants that accept them.

MSN’s red tape chronicles recently outlined a changing landscape for cardholders that stands to greatly benefit merchants. Banks are finally starting to crack down on friendly fraud type chargebacks. Banks aren’t doing it specifically for the benefit of merchants, as they found that customers whom initiate a large number of possible friendly fraud chargebacks are also those often in financial trouble, it will nevertheless benefit merchants.

In a recent survey, it was found that more than 1/5 of fraud loses come from friendly fraud scenarios. Reducing fraud loses by even 5% overall would be a huge achievement, and would account for almost $7 billion dollars per year in recovered revenue for merchants.