It’s been nearly five years since the coalition comprised of Europay, MasterCard and VISA (EMVCo) shifted the liability for payment fraud from the banks to the merchant. In that time, chip cards have become ubiquitous. Payments made using a swipe have officially jumped the shark, and the face of fraud has become friendly.
“Friendly fraud” as it’s called, occurs when a cardholder disputes legitimate charges with their credit card provider, forcing a refund under the false pretense that the merchant made an error. This happens when merchants are ill- equipped to accept EMV payments – meaning, they don’t use a chip-enabled card reader during the payment transaction. If a restaurant guest, for example, argues the charges in the absence of a chip card reader, banks will reverse the transaction with no recourse by the restaurant operator.
Friendly fraud charges have been on the rise for two reasons. First, it’s easier than ever for customers to dispute charges – often taking only the tap of a mobile banking app. Second, it’s difficult and costly for merchants to argue chargebacks or to prove the legitimacy of a transaction.
According to Chargeback Gurus, chargebacks have grown 179 percent in the last two years, costing merchant’s 1.9 percent of their total annual revenue. They are anticipated to exceed 40 billion dollars before 2025. Additionally, 31 percent claim that identifying friendly fraud is their biggest challenge… Modern Restaurant Management