Friendly fraud  also known as first-party fraud or chargeback fraud  occurs when a legitimate cardholder initiates a chargeback on a valid transaction. Unlike classic fraud, where a third party uses stolen card details, friendly fraud is committed by the customer themselves (or someone in their household), often claiming they didn’t authorize a charge when they actually did.

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The term “friendly” is misleading  it suggests an innocent mistake, but friendly fraud can be intentional or accidental:

• Accidental friendly fraud happens when the cardholder doesn’t recognize a charge, misunderstands a billing descriptor, or forgets a family member used the card (e.g., a child making in-app purchases).
  
• Intentional friendly fraud is deliberate abuse. The customer knowingly receives goods or services but disputes the charge anyway  often citing reasons like "item not received" or "unauthorized transaction" to get a refund and keep the product.

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For example, a customer might purchase an expensive item online, receive it, and then falsely claim fraud to their bank. The bank processes a chargeback, the customer gets refunded, and the merchant suffers the loss of both the product and the revenue.

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Friendly fraud is one of the leading causes of chargebacks, making it a significant concern for acquirers and payment facilitators managing merchant portfolios. It can erode trust in a merchant’s risk profile, inflate chargeback ratios, and trigger network monitoring programs if left unchecked.

To fight back, merchants and their payment providers rely on evidence such as:

• Delivery tracking and confirmation
  
• Device fingerprints or IP logs
  
• Customer communications or usage records
  
  

Dispute representment tools provided by acquirers or processors

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Because banks often side with cardholders by default, clear billing descriptors, real-time transaction data, and proactive fraud detection tools are essential defenses. Ultimately, friendly fraud turns the customer into the fraudster, and reducing its impact requires a coordinated effort between merchants, acquirers, and technology providers.