What distinguishes friendly fraud is that a legitimate customer, not a bad actor, perpetuates the fraud. The most common form of the scheme occurs when shoppers request chargebacks from their banks, claiming that their transactions were fraudulent or that their orders never arrived. FIs overturn the sales and grant refunds before returning to the restaurants to recoup the payment.
This practice is relatively benign in many cases: The customer just wants the money back for something they did not order and files with their bank rather than requesting a direct refund from the restaurant. This is an inconvenience for QSRs but is considered an everyday part of doing business with credit cards.
Sometimes customers are less than honest, however. Perhaps they get buyer’s remorse and want a refund even though they enjoyed their meal. A child might get their hands on a parent’s credit card and order a large quantity of food without consent.
The customer wants the money back in either case, but neither the restaurant nor the bank has any refund obligation, so the shopper makes a false chargeback claim with their bank that perhaps the order was fraudulent, the food never arrived or the order was inaccurate. The bank wants to remain in the customer’s good graces even though it has no means to verify the claim, so it accepts the request and the restaurant is stuck paying the bank. Mobile ordering led to the rise of friendly fraud… PYMNTS.com