It’s no secret that the Internet isn’t planning on going anywhere any time soon. It’s ever expanding reach is grasping the world at an alarming rate, with over 2.4 billion people having joined the online revolution from 2000 to 2015. And with that expansion has come a bevy of amazing technical innovations and cultural milestones. The advent of social media, video sharing sites and instant knowledge on virtually any topic has changed the way we live our lives.
E-commerce: The New Way to Shop
One of the Internet’s most appealing characteristics is its convenience. One of the largest markets to take advantage of that instant gratification is the retail industry. Thanks to the Internet, we can go shop for almost anything without ever having to leave the comfort of our beds. Online shopping, also known as e-commerce, has become a major source of revenue over the past decade and, much like the Internet, shows no signs of stopping.
It is projected that e-commerce sales will reach approximately $1.92 trillion by the end of this year, with 40% of Internet users worldwide (more than 1 billion people) purchasing their goods online. By 2018, online purchases will represent roughly 9% of total retail sales, compared to less than 6% in 2013. Growth in this area will be accompanied by the the inevitable issues that have plagued traditional shopping outlets since the creation of the credit card: fraud.
What is Friendly Fraud?
While credit card fraud is nothing new, thieves have been taking relatively newer tactics to dupe credit card companies or retailers. One such method is through what is called friendly fraud. Essentially, friendly fraud is when a consumer makes an online purchase, receives his or her goods and then immediately calls the issuing bank and demands a chargeback, while keeping the good or service. Friendly fraudsters do not steal card information from anyone else; they simply try to reverse transactions on their own cards at a cost to the merchant.
According to a report from Inc.com, in 2012, online merchants lost at least $11.8 billion to friendly fraud. A report from CBS also noted that 86% of friendly fraud cases were intentional (some cases of friendly fraud are legitimate accidents on the consumer’s part). Even the rich and famous aren’t immune to the scoundrels of the Internet. Last year, rapper Soulja Boy, who sells hoverboards online, fell victim to friendly fraud when several customers requested chargebacks after purchasing his hoverboards, scamming the rapper out of almost $175,000.
What You Can Do
Unfortunately, due to the amount of time and money required for a chargeback investigation, most retailers do not pursue friendly fraudsters. They simply “eat the losses.” But there are ways for merchants to take control of the situation.
Companies such as Chargeback specialize in assisting merchants to reduce the amount lost to friendly fraud. Chargeback uses both automated data recovery as well as manual data manipulation to prepare reports that are presented to the bank or issuer in order to recoup lost revenue. The company also retains information on frequent friendly fraudsters in order to help merchants prevent future scams. At the Opes Group we provide our clients with diverse resources for managing and improving their businesses. Tips such as this can save a small business thousands of dollars and can be the difference between staying open and closing shop.
If you’re a merchant who has fallen victim to friendly fraud, don’t despair. You can now take charge of chargebacks!