Credit card scam cases are increasing rapidly. Not just the general public but small businesses have been trapped. Unfortunately, scams are spreading, and credit card holders have a high chance of getting duped. Our previous blogs have given several ways to secure oneself, but today’s blog concentrates on how small businesses get duped by credit card scams.
Small enterprises are often trapped in friendly fraud. This range of businesses is already overwhelmed with other factors such as struggling for growth in the market. At the time of the COVID pandemic, credit card fraud has highly affected this arena.
Friendly frauds are very hard on small-scale businesses; here, consumers gain all the products and services, but later on, they ask for a refund from their credit card issuers rather than returning them. This process is called a chargeback.
In credit card scams, friendly frauds become normal. People these days are acting wise and behaving conscientiously. But unfortunately, they know what things are in their favor, so small businesses have to bear it.
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But Why Do Small Businesses Have to Tackle The Cost of Fraud?
Friendly frauds are dangerous because it appears to be of no sense as well as small businesses are afraid to file a case. It works on what is right, and there is no way out. But, first, we should understand precisely about friendly fraud.
In a credit card scam, an unauthorized person makes purchases from both online and offline platforms without the confirmation of the card beholder. Later, when the authorized person notices this, he marks it as fraudulent activity. It is a human tendency to analyze negative situations primarily.
Hence, they are unable to think of other situations such as someone else would have used it in my absence (Friendly Fraud). Being impulsive, they ask for a refund. In some cases, neither the business nor the person is at fault. Hence, people are not faithful, and all the charges have to be paid by small businesses.
A study reported friendly fraud accounts are 70% of all credit card frauds. It costs the industry a total of $132 billion a year.
Causes of Friendly Fraud
There are two common causes of this credit card scam.
The cardholder finds confusion while going through the transaction history. He made the purchase but didn’t recall. In such cases, they have asked for a refund.
2. First-party Fraud
It does not include any scammer or fraudulent activity. Suppose your children play games on a mobile phone and purchase some coins by providing the credit card PIN without letting you know. It is mainly reported as a household person. In such cases, the chances of friendly fraud can be high.
But here is a twist. We agree that chargebacks are hard on small-scale businesses. At the same time, a business needs to understand whether the chargeback is legitimate or illegitimate. If it is illegitimate, there is a high chance that small-scale businesses should be counted as white-collar businesses.
In recent cases, many small-scale businesses have had to repay many cardholders. On the contrary, while filing the lawsuit, individuals do not provide specific documents as required.
Businesses should show some guts and fight against what is right. There are policies for both customers and businesses. In case, a business wins the case they can recover a lot of revenue by fighting this credit card fraud, but it can be a complicated process.
Friendly Fraud as Cyber Shoplifting
It is essential to understand that people can abuse the process. They play with our minds and show us something that is beyond reality. A fraudster mind will do anything to earn money.
If we put it correctly, there is a lot of information surfing on the internet that provides preventive tips to their readers. Still, unfortunately, people started misusing it and so filed fake cases.
Here a fraudster can make various excuses. For example, a customer can call a bank for a chargeback or lie about purchasing an unauthorized product. They sometimes call the merchant for a refund, but they don’t respond.
Some activities indicate that a fraudster has duped them. They directly ask for a chargeback from the bank. A proper process has been created; the bank does not indulge in such activity. It is between the person and the merchant.
It is common sense; if you are not letting the merchant know about the situation, how would they know? But unfortunately, duped people often become judgemental, and ultimately they blame the merchant for not providing them chargeback.
How To Prevent a Merchant From Friendly Fraud?
Here are some ways to prevent a merchant from credit card scam:
- Most of the time, the victim feels guilty. Hence, he is not liable to provide a chargeback without any solid proof.
- If a person has filed a complaint in the bank, a merchant willing to fight can follow the procedure and submit the required documents.
- The bank tends to listen to only one party until and unless the other party is keen to submit the document.
- Merchants can share the official receipts and screenshots from their secured data and submit them to the responsible authorities for solving the case.
- Every minute detail is vital and benefits both the party’s points of view.
In this condition, three outcomes will be performed:
- In the case of an illegitimate chargeback, a merchant is not liable to pay you back any amount of money.
- If the case is of a legitimate chargeback, then and only then is a merchant liable to refund back.
- To be honest, such a process would be lengthy and complex. So instead, you can take the help of a third party.
Credit card scams are normal nowadays, but it does not mean that we keep ignoring them. On the contrary, there is always a better chance of dealing with such cases. In this blog, we have shared unique details of friendly fraud that is increasing day by day, also, we understand the pain of a victim. Small businesses need to raise their voice and it is high time.