Retailers Face the Hidden Costs of ‘Friendly Fraud’

By: Anneken Tappe · September 18, 2023 · Reading Time: 2 minutes

What Is Friendly Fraud?

“Friendly fraud” includes practices such as customers misusing a company’s return policies or reuse first-time customer discount codes.

Friendly fraud may seem benign to consumers looking for the best deal. But it’s costing companies as much as $100 billion per year, according to a global survey from fraud prevention company Riskified .

Running Rampant

This surge in fraud is largely the result of promotions, as well as lenient return and refund policies.

As companies have become more generous with their customer policies to drive loyalty and sales, they opened up avenues for exploitation.

Now they are responding: Some businesses are creating more detailed profiles for their customers. If someone requests a refund, their entire purchase and return history will be examined in order to determine if they’re a high-quality customer or a potential scammer. It turns out, the customer is not always right.

Read more reporting here .

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