Friendly fraud occurs when a legitimate customer subsequently initiates a chargeback for a transaction they knowingly authorized, claiming the purchase was unauthorized, undelivered, or otherwise unsatisfactory. The practice has been widely publicized on social media platforms. This type of dispute results in revenue loss, increased operational costs, and added risk for merchants as well as financial institutions. Tr
Use case/ examples of friendly fraud
Transactions: Purchasing an item online or using a service (like Airbnb), then falsely claiming the item wasn’t delivered or was received damaged, or the service was of poor quality, to receive a chargeback refund.
Subscriptions: Forgetting about a subscription service with auto-renewal, and disputing the renewal as unauthorized.
"Unauthorized" users: Allowing a child to use a credit card for something like in-app or in-game payments, then later disputing the charge with the merchant.