This report takes a closer look at this threat by first explaining the spectrum of friendly fraud (false claims) and exploring whether merchants and issuers are in fact “training” cardholders to initiate disputes. It also examines the balancing act that merchants and issuers must navigate when trying to reduce friendly fraud, while also preserving important customer relationships. Lastly, it details how two companies are addressing the problem, and then outlines six best practices for controlling the damage.
This paper explores the size of the false declines problem, explains the destructive impact on customers who are wrongly turned away, delves into why transactions are declined and reveals how the industry currently manages declines from both a card issuer and merchant perspective. It then presents some possible approaches to solving the problem, including several pilot programs that Ethoca currently has underway with card issuers and merchants.