Friendly fraud set to surge by 25% over peak holiday shopping days

Global eCommerce merchants are bracing for a projected 25% rise in 'friendly fraud' during the peak shopping period between Thanksgiving and Cyber Monday, data from ACI Worldwide shows. The analysis, based on billions of transactions, highlights growing retailer vulnerability to consumers who dispute legitimate purchases after the fact.

Financial impact

The anticipated increase comes as the average transaction value associated with friendly fraud is expected to climb to USD $291 over this holiday shopping season. This marks a year-on-year increase of 21%, or USD $52, compared with the previous year. Friendly fraud, also known as return fraud, is costing retailers globally an estimated USD $103 billion each year.

Changing behaviours

The phenomenon occurs when customers, following a legitimate purchase, claim their transaction was fraudulent to secure refunds. Recent trends show this is being facilitated by social media, where so-called 'refund hacks' are gaining traction and making such activity appear more socially acceptable.

"These numbers are staggering and show just how bold consumers have become," said Erika Dietrich, VP Analytics & Optimisation Payments Intelligence, ACI Worldwide. "Over the past several years, refund abuse and friendly fraud have surged, driven by frictionless eCommerce and amplified by social media. Platforms spread so-called 'refund hacks,' making misuse appear socially acceptable, while merchants bear the operational and financial burden. Instant refunds, free returns, and omnichannel complexity create loopholes that opportunistic consumers exploit, costing businesses millions."

Fraud trends

During the Black Friday to Cyber Monday window, transactional volumes are forecast to increase by 27% year on year. However, the average transaction value for all purchases is set to see a slight fall, dropping by USD $3 to USD $131. At the same time, there is a 30% growth in mobile device transactions, underlining the shift to digital-first commerce.

Industry-wide, fraud decision approval rates have reached 95%. In contrast, ACI reports a rate of 98% for its merchant clients through its Payments Intelligence platform. Chargebacks remain at 0.04% of transactions, with an average transaction value of USD $148-down USD $54 from the previous year-as some fraudsters shift tactics from chargeback fraud to friendly fraud methods.

Merchant strategies

Many retailers still employ traditional fraud management approaches, which can fall behind as digital shopping becomes more complex. ACI is promoting methods that leverage artificial intelligence (AI), machine learning, and digital identity profiling to detect and prevent these fraudulent activities in real time. The company highlights the importance of secure data-sharing across merchant networks, policy enforcement against repeat offenders, and gathering evidence by reviewing transaction histories.

"ACI's AI-powered Payments Intelligence helps merchants prevent fraud in real time while achieving an industry-leading approval rate of 98% during the holiday season," said Cleber Martins, head of Payments Intelligence at ACI Worldwide. "We optimise every decision across the entire customer journey, from account creation and checkout to refunds and returns. By balancing risk and revenue at every touchpoint, we enable our customers to achieve higher profitability without sacrificing the customer experience."