Friendly fraud or cyber-shoplifting is a term used to describe "card not present" claims committed by the actual card holder. Most shoppers, of course, would never commit this kind of fraud, but friendly fraud remains a significant problem for thousands of online merchants across the country.
According to the Federal Reserve System’s triennial payments study in 2013, over two-thirds of all non-cash transactions in 2012 occurred on a credit card, which is up significantly from 60% just three years prior. In the study, it is also very apparent that cards carry the highest risks; especially with friendly fraud or cyber shoplifting.
In "The 2013 Federal Reserve Payments Study", it is estimated that there were 122.8 billion noncash transactions in 2012, which is up 14% from 2009, and the last year the Federal Reserve did their study. In that time span, credit card or card based payment grew 28% to 82.3 billion transactions. The data from the Federal Reserve shows us that because of e-commerce, people are more readily making more purchases.
Additionally, according to LexisNexis and their yearly study "The True Cost of Fraud", friendly fraud or cyber shoplifting accounts for about 20% or about $22 billion annually of all the fraud that merchants are unnecessarily absorbing. Also, according to LexisNexis, a merchant pays an average of $2.70 for every $1 lost to friendly fraud. In other words, if a merchant sold an item for $1,000, and the customer made a simple claim to their credit card company that it wasn’t them, that item actually cost the merchant $2,700.
Friendly Fraud In The News
FBI Warns of Friendly Fraud
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