Can there be such a thing as ‘friendly’ fraud? What exactly is it, why is it happening and what can be done to safeguard against it?
I’m sure you’re aware that over the course of the past 10 months there have been some significant changes in the way we act. With the pandemic, lockdowns and restrictive measures altering consumer (and human) behaviour, the impact on people’s buying habits has been severe.
And it appears to be more than just how we purchase our goods and services, it’s also about pushing the boundaries on what we try to get away with when we purchase our goods and services.
Many are struggling right now, and everyone likes to save money when possible. But with the pressures of the pandemic and the rise of so-called friendly fraud, merchants need to increase their vigilance.
Covid has skewed the sense of right and wrong for some
The Covid crisis has created a complicated situation when it comes to criminal activity and fraudulent claims. Almost 36% of UK consumers admitted, in a Signifyd poll, to having recently filed false fraud claims in order to claim money back from retailers.
More than 30% said they had falsely claimed that an online order had never arrived even though it had or that the product was unsatisfactory, even though it was not. In both cases, consumers were trying to keep a product and receive a refund. More than 32% admitted to abuse a promotion or discount code, for instance, by lying about making a first-time purchase.
It’s probably cold comfort that a survey of U.S. consumers turned up similar answers.
These startling statistics provide a warning for retailers and merchants to be on the lookout and thoroughly scrutinise any chargeback claims (and be ready to challenge them). A “chargeback” is the term for when a consumer asks their credit card company for a refund because a purchase didn’t go as promised. The card company then recovers the money from the merchant involved.
The results of Signifyd’s survey, which was conducted in September, were in stark contrast to a similar survey taken in January 2020, before coronavirus was a fact of life. In the earlier version, only around 8% of consumers admitted making a false claim about a package not arriving.
Well over half of respondents in the U.S. and the UK say their incomes have been adversely affected by the COVID-19 pandemic and a similar percentage say they expect to take a financial hit in 2021.
With joblessness, stress and a general malaise, society’s moral compass may have become slightly skewed. That, along with the necessity of making ends meet, all add to the flavour of what is right and wrong — and the sometimes hazy spectrum that runs between.
Of course, some cases are far more innocent than others: a simple error, not recognising a merchant’s name, forgetting a purchase, a family member making said purchase etc. But often it is a little more ‘sinister’ with the consumer actively taking advantage of the situation and the ease at which purchases can be disputed (online and at the click of a button). The consumer is protected — and rightly so, but that opens retailers up to reprisal when no claim actually exists.
What can be done?
Being proactive and making sure all is in order is a good way to go to try and curb potential disappointments. Making sure descriptions and images are clear on your website for example, helps to stave off any confusion. Instead, the consumer knows exactly what to expect, making it less likely (and possible) to take advantage of a potential “discrepancy.”
As nearly 80% of consumers are opting to do their shopping online this year, getting it all done from the comfort and safety of their home. Spotting cases of friendly fraud and protecting yourself fully becomes ever more important as we begin the new year and whatever the new year brings.
The lines have been blurred as to what is acceptable behaviour and we all have a responsibility to help get things moving along the right tracks again. Consumers, for their part, must act in an honourable and legal way, or else face the consequences. For retailers, complete clarity in what you offer and what you expect in return, is a start.
Be professional and compassionate, communicate well throughout the buyer’s journey, remind customers who you are and confirm shipments have reached your customer (and in a good state). That will help you keep on top of this trend.
There is no doubt that these times are different from any before. They present the sort of challenge that resilient retailers find a way to tackle. Once the current challenge is tackled and the virus is tamed, the best among them will look back and learn. And then they’ll redouble their efforts to serve a new breed of consumers shopping with a new brand of behaviour.
By Ed Whitehead, MD EMEA, Signifyd