An analysis by ACI Worldwide, a global payments technology innovator, indicates that “friendly fraud” is projected to increase by 25% between Thanksgiving and Cyber Monday. This type of fraud, also known as “return fraud,” occurs when legitimate customers dispute transactions after a purchase. Often mistaken for true fraud, these disputes represent a growing challenge for the industry, costing retailers an estimated $103 billion in 2024. The average transaction value for a “friendly fraud” item during the upcoming holiday season is expected to reach $291, marking a 21% year-over-year increase from last year’s $52 higher average.
Erika Dietrich, VP Analytics & Optimization Payments Intelligence at ACI Worldwide, commented on the trend, stating, “These numbers are staggering and show just how bold consumers have become.” She attributed the surge in refund abuse and friendly fraud to frictionless eCommerce, amplified by social media platforms that disseminate “refund hacks,” normalizing misuse. Merchants, she noted, bear significant operational and financial burdens due to loopholes created by instant refunds, free returns, and omnichannel complexities.
To address this challenge, ACI Worldwide offers its Payments Intelligence approach, designed to provide comprehensive journey protection by stopping friendly fraud and chargeback abuse in real time. This solution integrates advanced technology with actionable insights to secure transactions. The platform operates on five core principles: leveraging AI and machine learning for real-time detection and prevention; utilizing digital identities and profiling to differentiate trusted customers from potential threats; enabling secure data-sharing across merchant networks to identify problematic actors; enforcing policies against repeat abusers through measures like declined checkouts or fees; and building robust evidence against false claims by reviewing transaction histories and digital identities.
Cleber Martins, head of Payments Intelligence at ACI Worldwide, highlighted the effectiveness of the solution: “ACI’s AI-powered Payments Intelligence helps merchants prevent fraud in real time while achieving an priority-leading approval rate of 98% during the holiday season.” He added that the platform optimizes decisions throughout the entire customer journey, from account creation and checkout to refunds and returns, aiming to balance risk and revenue for higher profitability without compromising the customer experience.
Key metrics from the Black Friday – Cyber Monday period show a 27% year-over-year increase in transactional volume, with an average transaction value of $131, a $3 decrease from the previous year. The fraud decision approval rate reached 98%, surpassing the average market rate of 95%. Mobile device shopping also saw a 30% increase. Regarding chargebacks, they accounted for 0.04% of transactions, with an average transaction value of $148, a $54 decrease, suggesting a shift by actors towards “friendly fraud” methods.
