Thought Leadership
8 minutes

Friendly fraud is an issue across all industries that conduct business online, but is an especially egregious problem for the event ticketing industry. The ticketing industry made over $10 billion in revenue throughout 2019, and shows no signs of slowing.1 More business means there’s more of a chance for fraudsters to steal some of that profit.

Credit issuers often see online ticket sales as a high-risk investment, which means the issuer considers the merchant to be at a higher risk of fraud and chargebacks. Because of this, a vendor needs to remain highly aware of the nature of transactions that are processed through their account in order to avoid fees or even the possibility of having their account closed permanently. 

What is friendly fraud?

Tickets to popular, live events can range greatly in value—both monetarily and in perceived value on the part of the patron. Both the primary market and the secondary market can influence a ticket’s price.

If a patron decides the event wasn’t worth their time or if they weren’t able to make it to the event, they may feel entitled to a refund. And since most ticket sales are final, patrons feel a chargeback through their creditor is their only recourse. This type of fraud, known as chargeback fraud or friendly fraud, can and should be fought.

Vendors can implement many different technologies and strategies that encourage patrons to work with merchants before going to their bank or credit issuers, and those same technologies can offer vendors evidence that can work in their favor in the event of a chargeback request.

Here are a number of options that a ticketing vendor can employ before, during, and after the transaction when it comes to fighting friendly fraud.

Before the transaction

Accurate item descriptions

Many chargebacks are tied to dissatisfaction on the part of the product, because the patron thought they were going to receive something different from what they actually did. Ensure that your descriptions are up to date and consistent with what the product actually does.

Clear policy statements

Make sure that your terms of service and return procedures are easy for patrons to find and understand. This can prevent any misunderstanding on the patron’s part if they decide they want a refund or misunderstand the terms of a sale.

Good customer service

The best thing any company can do to prevent chargebacks is have a clear and open line of communication with their patrons. You can head problems off ahead of time if patrons have an easier time contacting you; and this also means they’ll think to go to the merchant first instead of instantly hitting the ‘request chargeback’ link on their creditor’s website.

During the transaction

Use an Address Verification Service (AVS)

An AVS can go a long way in fraud prevention. It can stop true fraud before it happens, and also alert a merchant to potential friendly fraud when an address does not match the address associated with the credit card that is being used to complete the transaction.

Collect a Card Security Code (CSC)

A CSC is a security feature on a credit card that is used to prevent “card not present” fraud. This is especially useful for online and other digital transactions where a merchant may not be able to physically examine a patron’s credit card. A CSC is typically three or four numbers on the front or back of a physical credit card.

Use 3-D Secure

3-D Secure and EMV 3-D Secure are two additional security layers to assist in making safe online purchases for both the patron and the merchant. 3-D Secure is an online authentication process that connects with and requests verification from the card-issuing bank in the event of a transaction. EMV 3‑D Secure enables patrons to authenticate themselves with their card issuer when making card-not-present e-commerce purchases.

Offer insurance

As a workaround for otherwise nonrefundable events, vendors can partner with a ticket insurance provider to offer event goers an “out” if something comes up before or on the day of the event. For an additional fee, patrons can opt into one of several insurance coverage plans that refund the cost of the ticket in the event of a family emergency or inclement weather. Some insurance providers even have a “didn’t feel like going” option! 

After the transaction

Use delivery verification for big-ticket items

This might be seen as a hassle to the patron, but it’s a great verification method that the item was delivered and received by the purchaser. Such information can help a representment case in the event of a chargeback request.

Clear billing descriptors

A billing descriptor is what your patron will see on their credit card statement; will your patrons recognize your business? If they don’t, this can lead to friendly fraud simply because of a misunderstanding. Prevent it ahead of time by being transparent.

Follow up with patrons

Send surveys or emails to reconnect with patrons who make a purchase. Find out how their experience was, and use this information to make adjustments if necessary. Not only does this help potentially prevent chargebacks, but is also just good practice to ensure that you’re running a friendly and ethical company that from which your patrons enjoy buying.

Good business means less friendly fraud

There are a few signs that can indicate a transaction may end up becoming friendly fraud; if there’s an inconsistency between the shipping and billing address, a patron may end up claiming the ordered item was not delivered. Duplicate orders, large purchases, and frequent or suspicious inquiries about the order status may also indicate that a patron may pursue a chargeback claim.

Merchants should be proactive in collecting information regarding these transactions early in the process, so they can respond quickly to recover lost revenue.

1. Industry Market Research, Reports, and Statistics. (n.d.).