Friendly Fraud Becomes Sworn Enemy For Restaurants

Restaurants

As per a new survey by Ravelin –a fraud detection specialist, it has been observed that modern mobile-based payment platforms are leading to higher instances of the occurrence of ‘friendly fraud.’

Payment disputes that are correlated with friendly frauds are expected to increase because of the pandemic-accelerated increase in e-commerce. Networks, processors, and card issuers are observing that consumers who seek contactless purchasing tend to be making the respective conventional methods of managing disputes unsustainable.

Advanced analytics, new technologies, and redesigned processes might have a major impact. However, through history, the industry has been gradual when it comes to investing in back-office improvements. When the issuer would include modern technology –like automation, to the current processes, it turns out to be preventive rather than strategic. This is the reason why it is high time that we should reconsider the way in which we approach the given claims.

Friendly Frauds & COVID-19

The ongoing pandemic has forced the end consumers to scale back or eliminate shopping trips to brick-and-mortar retailers out there. This has resulted in delivering more transactions to e-commerce. Due to this, average transaction amounts tend to be shrinking. As more retailers are offering free shipping, consumers are no longer required to bundle up subsequent purchases. Supply chain disruptions, government restrictions, and financial hardships have altered purchasing patterns –leading consumers to cancel purchases, switch to alternate items, and re-approach subscription services.

The current purchasing trends have made the ongoing rules to settle disputes. More transactions result in more claims –creating backlogs and intimidating call centers. Along with pandemic-specific shopping trends, transactions have also become highly abstract because of the overall rise of in-app and digital payment platforms. The given options send over transaction-based data through some third party. This includes an extra layer between the merchant and the cardholder.

This leads to ample confusion as consumers are reviewing the respective statements. This often results in friendly frauds. It is regarded as a situation in which the consumer would dispute some legitimate charge. Consumers might not recognize a specific transaction that might have been bundled by some alternate digital storefront. On the other hand, the consumer might also realize that some family member or friend might have used the respective card. One of the most difficult claims that merchants have to verify is that the packages have not been delivered. Moreover, consumers have also found that contacting the respective credit card issuer turns out to be the most convenient way of disputing a charge –even after the overall ease with which the given matters could be resolved by directly contacting the merchant.

Ways to Improve the Consumer Experience

Just like merchants have brought about significant changes for retaining consumers during the pandemic, issuers are also expected to instantly reduce friction in the respective dispute processes while improving the cardholder experience. Here are some ways to achieve the same:

• Utilization of Self-Service, Robust Tools: When interactive tools are utilized for claim resolution, it offers the customers the overall ability to effectively understand the transaction & its respective context. At the same time, the consumers are also able to communicate directly with the merchants. As & when needed, the consumers can file a dispute claim with the respective issuer. This, in turn, would allow issuers to focus on the respective transactions requiring intervention while offering ample time to do so within the given set of regulatory timeline.
• Improved Insights into Transaction Data & Spend: With this capability, the consumers are allowed to effectively recognize the respective purchases while offering a more direct route for resolving disputes with the respective merchant. The presence of rich data also allows the consumers to review shipments, refunds, recurring expenditures, and cards on file. This tends to increase the overall customer confidence while preventing several disputes from getting filed in the first place.
• Advanced Tools for Customer Service: These tools enable representatives to easily resolve disputes while capturing top-quality data during the initial call. This helps in reducing the call times as well as the number of calls required for gathering details related to the dispute.

Issuers will also be required to regard a highly intelligent approach towards settling claims once they have been filed. Conventionally, they have dealt with dispute resolutions in the form of a binary decision. For instance, if the given charge is less than a specific amount, then it will get paid off automatically. On the other hand, charges above the given limit will be investigated properly. However, if a higher percentage of transactions would fall below the mark, then writing off the given transactions would turn out to be a losing proposition.

Proper investments done in predictive analysis & AI or Artificial Intelligence can help in allowing issuers to ensure smarter decisions by categorizing disputes while routing them to the most efficient methods for dispute resolution. The capability of associating an event –like a transaction swipe, along with Machine Learning models can help in offering a data-driven overview of the existing disputes. This tends to evolve with time dynamically.

Every charge that has been disputed can be scored for the resolution’s difficulty level. This helps in replacing the typical binary system of decision-making on the basis of conventional write-off limits. The utilization of real-time insights –like the detection of repeat abusers, will help in identifying the possibilities of frauds while ensuring successful merchant payback.

Conclusion 

Issuers that pay attention to observing claims, complaints, and costs will be rising in the next few months. Such issuers should not expect any major reversal in the respective trends as put forth by the pandemic. Consumers that have turned to options like purchasing online for curbside pickup might not revert to traditional methods once the outbreak has been controlled.

The adoption of an intelligent approach towards friendly frauds as well as disputes can help in deflecting several claims while also reducing the overall costs and creating a highly sustainable model for the issuers out there.