--- title: Are merchants facing a criminal customer crisis? date: 2023-08-29T13:30:00+01:00 author: Ravelin Technology canonical_url: "https://www.ravelin.com/blog/criminal-customer-crisis" section: Blog --- Blog /[Fraud analytics](/resources?search=&category%5B0%5D=134547#resourceContainer "Go to Fraud analytics"), [Payments & payment fraud](/resources?search=&category%5B0%5D=189241#resourceContainer "Go to Payments & payment fraud"), [Refund abuse](/resources?search=&category%5B0%5D=204631#resourceContainer "Go to Refund abuse"), [Promo abuse](/resources?search=&category%5B0%5D=244453#resourceContainer "Go to Promo abuse") # Are merchants facing a criminal customer crisis? There’s a new fraud threat on the rise – and it’s your customers. First-party fraud is infamously tricky to catch and a huge revenue risk. How can you detect and deter criminal behavior in your customer base? 29 August 2023 ![Are merchants facing a criminal customer crisis?](https://storage.googleapis.com/ravelin-website-assets-production/assets/images/_blogSmall/187924/Feature-Image-with-no-logo-and-heading-1.webp) Professional fraudsters aren’t the only ones looking to capitalize on ecommerce growth. Your genuine customers are looking to get in on the action too. Our survey of global fraud trends revealed that **40% of merchants have seen an increase in fraudulent chargebacks**. And over 50% say the same for promotion and refund/returns abuse. But cracking down on fraudulent customers is a bit more complicated. Yes, you need to catch these “criminal customers” to protect your business. How do you do this without losing reformable individuals as genuine customers while also deterring others from doing the same? ## What is first-party fraud? Also called friendly fraud and customer fraud, first-party fraud is essentially fraud committed by an individual using their own identity and credentials rather than by someone pretending to be a person they're not. This behavior could be accidental, opportunistic or malicious. So first-party fraud may be genuine customers exploiting loopholes to save a buck or intentionally looking to make fraudulent gains. ## Why is friendly fraud on the rise? So, why is this a growing problem? - **The cost of living crisis:** Rising energy costs and inflation have put customers under pressure to cut costs for basic needs. Faced with this situation, many are easily tempted by money-saving tips – even if they aren’t entirely above board. - **Access to fraud tutorials:** Social media has become a breeding ground for fraud. The viral “Tesco method” on TikTok is just [one example](https://www.raconteur.net/economy-trends/tiktok-fraudsters-hurting-businesses). Easy access to this sort of Information normalizes fraud, and desperate customers can easily be incentivized to take risks. - **More opportunities:** Promotions, [Buy Now Pay Later](https://www.ravelin.com/blog/why-is-buy-now-pay-later-fraud-a-problem), contactless delivery, and other steps to make buying easier create vulnerabilities that criminal customers can exploit. An astounding [40% of customers](https://www.ravelin.com/blog/friendly-fraud-consumer-fraud-survey) admit to having been involved in fraud over the last year. What’s more, if it works once, the customer is likely to do it again. ![Ravelin - Criminal Customers](https://storage.googleapis.com/ravelin-website-assets-production/assets/images/Ravelin-Criminal-Customer-Blog-Post.png)## How criminal customers commit fraud Understanding the different tactics customers might use is the first step to identifying criminal customers and stopping them. So, what does first-party fraud look like in practice? ### False chargeback claims Fraudulent [chargebacks](https://www.ravelin.com/blog/chargeback-vs-refund-abuse) are when a cardholder misrepresents the truth when they file a chargeback claim with their bank, intending to defraud a merchant. For example, the customer might claim they never received an item when they have, or that the service was of very low quality, when it wasn't. Sometimes, the false claim might be accidental, but often it's deliberate. For example, the cardholder might not realize a family member ordered using their card, and think it was a fraudster who stole their credentials. More than [75% of customers](https://chargebacks911.com/chargeback-facts/) admit to filing chargebacks strictly out of convenience. Either way, 40% of those who commit this type of fraud will try again within 60 days. Chargebacks, false or not, cost merchants a lot. You lose the price of the item or service, as well as fees – and you don't receive the item back either. And if your chargeback ratio gets too high, you risk higher processing fees or having your accounts disabled. Chargebacks are calculated to have cost financial institutions and merchants more than [$117 billion in 2023](https://chargebacks911.com/chargeback-costs/). ### Refund/returns abuse [Refund/returns abuse](https://www.ravelin.com/insights/policy-abuse) is when a customer abuses your refund policy in order to gain free goods or money back – or both. Tactics can include: - **Wardrobing:** When a customer returns an item after using it e.g., returning a new dress or suit after wearing it to a wedding. - **Fake returns:** When a customer returns a different item, generally of inferior quality. They collect the refund and keep the product. - **DNA (Did Not Arrive):** When a customer falsely claims an order never arrived or was damaged. This is the most common form of refund abuse. As many as 56% of merchants say refund/return abuse has increased. Fraudulent returns already cost US merchants a whopping $23.2 billion. Remember, on average, a return costs you nearly [60% of the item's original value](https://www.cbsnews.com/news/amazon-walmart-returns-refund/). ### Promo abuse Promotion abuse covers different ways customers can take advantage of your promotional offers. Very often, this involves creating multiple accounts to access the same promotion more than once. This could be a signup or referral bonus, or voucher redemption. Most of the time, customers don’t even think they’re doing something wrong. They just think they’re being creative. The trouble is [promotion abuse often looks like growth](https://www.ravelin.com/blog/case-study-delivery-referral-promo-abuse). On the surface, you have happy loyal customers and an influx of new customers. In fact, [42% of merchants](https://www.paymentsjournal.com/the-hidden-cost-of-promo-fraud/) actively accept promotion abuse as a cost of doing business. However, not only do these false promotions damage your bottom line, they skew customer acquisition costs and marketing metrics. ## How to stay ahead of criminal customers Stopping criminal customers largely involves taking actions to make first-party fraud difficult to commit and identifying repeat offenders. Let’s break this down. 1. **Set return thresholds:** Select a number based on your industry standards. And then flag accounts that go over this threshold for further investigation or a returns ban. 2. **Build a case for disputes:** When it comes to friendly fraud, remember that you can dispute chargebacks. Customer data allows you to track repeat behavior, and demonstrate customer involvement in the purchase and delivery process. 3. **Track multi-accounting with graph networks:** Link analysis will allow you to monitor accounts and visualize connections between them. For example, if multiple new accounts appear with the same email address, device, or phone number, you could be looking at a serial promo abuser. 4. **Make committing fraud harder and more obvious:** Small barriers may be enough to stop opportunistic criminal customers. Of course, this needs to be done without damaging genuine customer experiences and losing conversions. But simply making your refund policy clear, having an easy-to-contact customer service team and sending order updates will help. ![Ravelin - Criminal Customer](https://storage.googleapis.com/ravelin-website-assets-production/assets/images/Ravelin-Criminal-Customer-Blog.png)## Every criminal customer is unique, your solution needs to be too There isn’t one solution to solving the criminal customer crisis. Opportunistic or misled individuals need to be handled very differently from malicious bad actors. However, in all cases of first-party fraud, you are dealing with genuine customers who may also be legitimately buying your goods or services – so, you need to progress carefully. Fundamentally, stopping criminal customers isn’t that different from stopping fraud as a whole. You need a solution that helps you fight fraud without damaging customer journeys. Effective use of customer data will help you do just that. **Are you facing a criminal customer crisis?** **Read about** - **[our chargebacks-preventing payments fraud product](https://www.ravelin.com/solutions/online-payment-fraud),** - **our [refund abuse solution](https://www.ravelin.com/solutions/refund-abuse),** - **and our [promo abuse solution](https://www.ravelin.com/solutions/promo-abuse)** **or, better yet, [book a call with the Ravelin team to discuss your specific needs and explore what we can do for your company](https://www.ravelin.com/contact-us).** ## Author ![Ravelin Technology](https://storage.googleapis.com/ravelin-website-assets-production/assets/images/_avatarSmall/187712/Ravelin-Symbol-Blue-1.webp) Ravelin Technology Press releases, announcements and official updates from Ravelin Technology. [More from this author](https://www.ravelin.com/author/ravelin-technology) ## Related content [Blog / Press release ### Driven by AI, customers now rival criminals for ecommerce fraud, say merchants Global ecommerce fraud enters a new phase as losses continue to climb. Merchants now view criminals and their own customers as presenting a comparable risk, and there's a gap in AI adoption. ![Ravelin Symbol Blue 1](https://storage.googleapis.com/ravelin-website-assets-production/assets/images/_33x33_crop_center-center_none_ns/187712/Ravelin-Symbol-Blue-1.webp)Ravelin Technology](https://www.ravelin.com/blog/ravelin-fraud-survey-2026-press-release) [Blog / Payments & payment fraud ### Safeguarding agentic commerce – fraud strategy advice by Ravelin's CPO "If there’s anything fraudsters like, it’s a new thing." Here's how to protect your online shop from agentic commerce fraud – which can target you no matter whether you're actively adopting AI shopping or not. ![RAVELIN STAFF Mark Barlow Head Of product website](https://storage.googleapis.com/ravelin-website-assets-production/assets/images/_33x33_crop_center-center_none_ns/175066/RAVELIN_STAFF_Mark_Barlow_Head_Of_product_website.webp)Mark Barlow,Chief Product Officer](https://www.ravelin.com/blog/agentic-commerce-fraud-prevention-strategy-analysis) [Blog / Ravelin product ### Next-level reporting with Ravelin: Introducing Insights and AI-powered queries Discover how the new Insights section and AI-powered queries in the Ravelin Dashboard simplify your fraud reporting. ![Ashleigh](https://storage.googleapis.com/ravelin-website-assets-production/assets/images/_33x33_crop_center-center_none_ns/267519/ashleigh.webp)Ashleigh Luccini Gilera,Senior Product Marketing Manager](https://www.ravelin.com/blog/fraud-reporting-insights-ai-queries)