Friendly fraud rise during Cyber Week threatens retail profits
US retailers are facing increasing challenges from friendly fraud during the crucial Cyber Week shopping period, as a growing number of consumers opt to file disputes through their banks rather than contact merchants directly. New survey data shows 77 percent of shoppers now prefer to initiate complaints with their bank, while 39 percent struggle to recognise transactions on their account statements due to unclear billing descriptors.
Dispute surge
Estimates for holiday online spending in the United States suggest that consumers will spend USD $253.4 billion this season, a 5 percent increase from the previous year. Cyber Week alone is projected to contribute USD $43.7 billion, up 6 percent year-on-year. However, dispute activity is also accelerating, with retailers preparing for increased chargeback volumes that threaten to erode profits during the busiest shopping period of the year.
Chargebacks911, a dispute resolution and chargeback management provider, reports that the rapid growth in online spending is being matched by a rise in chargeback claims, most of which are initiated after a sale. The company highlights that post-purchase issues now dominate customer complaints, shifting the focus for merchants from the transaction itself to the follow-up period.
Consumer behaviour
The change in consumer habits is contributing to a rise in first-party fraud and chargeback misuse, with industry research indicating this type of fraud now represents 36 percent of reported global fraud cases. Shoppers are increasingly turning to digital banking tools, allowing them to file disputes in seconds if a delivery is delayed or a transaction appears unfamiliar.
Common scenarios triggering disputes include packages arriving later than scheduled, customers not recognising purchases due to late-night shopping, and shoppers filing disputes over refunds they perceive as slow to process. In some cases, shoppers find better offers after making a purchase and challenge the original charge instead of cancelling by conventional means.
Retailer advice
Retailers are being urged to enhance post-purchase support to minimise chargeback risks. Measures such as updating customers regularly on delivery status, clarifying billing information on statements, and ensuring refunds are straightforward to trace can help reduce confusion that leads to disputes.
"Cyber Week used to be a straight line from discount to checkout. Today it is a much longer journey, and the hardest part comes after the sale. Customers order quickly, but they also forget quickly. When a delivery runs late or the billing name doesn't look familiar, they open their banking app and file a dispute in seconds. If retailers are not already preparing for this, they are risking revenue they worked hard to win," said Monica Eaton, Founder & CEO, Chargebacks911.
Eaton recommends that retailers use dispute alerts and management tools to monitor and respond to issues quickly, and to review internal processes to avoid double refunds. Ensuring banks and customers receive timely and accurate feedback is also critical.
Chargeback management
Chargebacks911 advises merchants to familiarise themselves with chargeback trends specific to their operations, respond to disputes promptly, and analyse dispute data in real time. Platforms with automated workflows and integrated coverage are viewed as essential for coping with peak-season surge in cases.
First-party or 'friendly' fraud remains a significant concern for merchants, with the culmination of increased online shopping and rapid digital financial services accelerating the trend.
"The next step for retailers is simple. Tighten the post purchase experience before the rush hits. Make the billing name clear. Keep customers updated on deliveries. Make refunds easy to find. And put dispute alerts in place so you can catch problems early rather than after the revenue disappears," said Eaton.
