Friendly fraud results in losses to retailers of more than $100 billion a year. However, most people who commit this crime feel justified in their actions.
According to data from Socure, more than half of respondents who engaged in friendly fraud over the recent holiday season cited financial struggles—such as rising interest rates and inflation—as the primary reasons for their behavior.
Friendly Fraud Over the Holidays
Friendly fraud, also known as first-party fraud, happens when consumers dispute legitimate charges, often resulting in a refund. These disputes may involve claims that an unauthorized purchase was made using their account or that an item was not received or was stolen by a “porch pirate.”
Consumers stressed out from the holidays believe that retailers can handle these losses better than they can. According to Socure’s data, nearly two-thirds of first-party fraud offenders agree that large businesses can afford to cover the cost of disputed charges. More than half of also say that strict return policies make first-party fraud more justifiable. Furthermore, 64% of respondents admit to being tempted by revenge fraud—the idea of disputing legitimate charges if a business makes a mistake on their bill.
As Socure noted, one reason this problem persists is that the industry has not done a good job of deterring people. Nearly half of those who committed first-party fraud during the 2024 holidays said they had also gotten away with it in 2023.
“To a certain extent, financial institutions can’t handle the volume of chargebacks we’re seeing,” said Suzanne Sando, Senior Analyst of Fraud and Security at Javelin Strategy & Research. “Consumers committing friendly fraud on lower-value items are able to sneak through the cracks, take advantage of their FI’s limitations, and get their chargeback approved.”
The Younger Mindset
It’s no surprise that younger consumers are more likely to commit this crime. While 13% of all respondents surveyed admitted to engaging in friendly fraud, that figure jumps to 40% among Gen Z members.
“Many consumers, especially younger generations, don’t feel a sense of loyalty to huge retailers, especially as we see the enormous profits of big businesses,” said Sando. “The attitude among this group of consumers is: if I keep this product and get refunded, what’s the big deal? It’s just a drop in the bucket of annual earnings for the business. To these consumers, this is perhaps a small act of protest against big corporations.”
Nevertheless, many consumers seem to be aware that what they’re doing is a crime. Three-quarters of respondents revealed that they hid their first-party fraud from their partners over the holidays.
