Originally published in the April 2020 issue of the Nilson Report

This year, sellers of digital goods worldwide can expect to see approximately 50 million requests for chargebacks of a legitimate purchase. Repudiated transactions include what is known as friendly fraud. Most often, friendly fraud occurs when a primary accountholder gives their payment card credentials to a family member and then disputes the transaction because they don’t recognize it when reviewing their monthly statement. 

These days, when so many people are working from home because of Covid-19, digital sellers must also deal with false claims for chargebacks from buyers who experience remorse at a spontaneous purchase.

Merchants including the largest digital sellers such as Apple, Microsoft, Amazon, and Google are so successful at fighting criminal fraud that friendly fraud can account for over 80% of their total losses to fraud.

These false claims for chargebacks impact issuers too. Their operational costs increase with expenses related to call center activity to handle disputes. Mastercard says those costs range from $15 to $70 per claim depending on the issuer and merchant.

Mastercard’s Ethoca business offers merchants and issuers technology to fight friendly fraud. Ethoca’s API-based Eliminator product, launched in 2018, enables issuers to deliver a full digital receipt to cardholders who dispute a transaction from any merchant also connected to the service. Receipts are delivered through an issuer’s mobile app.

Eliminator is deployed at one of the five largest U.S. credit card issuers, and reported inquiries about disputed transactions have fallen 15%. More than 65 large digital sellers in the U.S. and U.K. have connected to Eliminator, which currently delivers receipts globally. The expectation is that when more merchants connect to the digital receipt service, more issuers will connect the service to their digital banking systems.