Friendly fraud is the infamous name for something that payment systems aren’t actually able to prevent. Although I’m sure they can do much better. Especially large and sophisticated payment providers like Stripe with a mountain of signal.
One of my customers bought my product twice. It is called Siglu. This is cigar gum. Not a Rolex or an iPhone. First order shipped with DHL and delivered with proof of delivery. The customer did not reach out to request a refund or re-delivery, but I saw a dispute was filed so I reached out to them.
He said it was the bank’s mistake because the bank had mixed this payment with some genuine fraudulent transactions from the Philippines. They promised to contact their bank and also offered to pay me back via Paypal. I was happy that it was just a misunderstanding. I produced proof of delivery, customer communications, website policies, everything by the book.
It turned out that the customer was doing this intentionally and was lying to me. Not only did they not contact the bank to correct the situation, they actually pretended not to have received the product. And the bank, naturally, took their side. I had no support. Dispute accepted. Money, product, shipping and dispute fees are all gone. This is annoying, but not exactly unheard of. If you sell online, you probably know this feeling: You ship the product, gather proof, submit everything properly, and then somehow lose.
The same customer had placed it before the dispute arose. one more Order, this time with untracked shipping, and a few days after the first dispute, another dispute occurred. Once the first dispute was approved, things became clear. The customer emailed me to praise their clever plan. Literally giving me the finger.
I sent the screenshots to Stripe and asked if it could be reported properly. To the bank, to a fraud reporting network, or even internally within Stripe.
I didn’t expect Stripe to recover the money or overturn any closed disputes. I understand that the customer’s bank makes the final decision, and card network rules are what they are. But I was hopeful that the report itself would matter. This is a very clear case of “friendly fraud”. The card belonged to the customer, the address was valid etc. The customer seemed to enjoy screwing me. Very sad to think that this is a fairly cheap product in a niche hobby. but still.
I expected Stripe to use this evidence Some? A way to feed into sophisticated machine-learning anti-fraud systems. But no one.
After quite a bit of digging around, Stripe’s answer seems to be that it doesn’t really matter beyond my own account.
They told me they do not use evidence of chargeback abuse from one merchant to create cross-merchant fraud signals, or to take action against a customer’s card, email or other details for other merchants.
You probably don’t want a system where an angry merchant can get someone blocked in the entire Stripe payment system. But there’s a huge difference between “automatically block this person everywhere” and “thanks for the screenshot, please consider radar”, and this is where it gets frustrating.
Stripe sells Radar on the strength of its network: lots of payments, lots of signals, better fraud detection, machine learning, etc. Stripe sees a lot of transactions, so in theory it can detect things that an individual merchant can’t. But when a merchant sends real evidence that a customer is abusing chargebacks, suddenly it makes no sense. The recommended solution is to use radar rules to prevent the customer from purchasing from me again. And I’ll likely have to upgrade and pay for Stripe to use this rule. Yes thank you!
The next trader still starts from zero. This is also not the kind of fraud that Radar can easily resolve before payment is made. The transaction seemed fine, checks passed, physical address matched. The abuse occurred later through the dispute process. There is no clever checkout rule for “customer receives product and later lies to their bank”.
Small merchants already have little leverage in disputes: the bank makes the decision, Stripe takes aim at the bank, and I lose money, product, dispute fees, and time spent dealing with all this. If new evidence comes to light later, it may be too late to present. If the customer does the same thing somewhere else, and someone tells me this is not this person’s first rodeo, the next merchant is in trouble.
There is nothing friendly in this. Plus perhaps Stripe is effectively being friendly to the fraudsters here No Doing anything about it.
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