Friendly fraud occurs when customers dispute legitimate transactions, leaving your business drowning in chargeback fees, damaged reputations, and lost revenue.
Plus, with CBD already labeled a “high-risk” sector, even a few false claims can cripple your ability to process payments
By understanding the risks and deploying targeted strategies, CBD merchants can fight back. This article reveals actionable steps to reduce friendly fraud, secure transactions, and safeguard your business.
The Hidden Threat: Why Friendly Fraud Targets CBD Businesses
Friendly fraud occurs when customers falsely dispute charges, often claiming products were undelivered, ineffective, or unauthorized. For CBD merchants, this risk is amplified.
The industry’s regulatory ambiguity and perceived health claims make it a magnet for dishonest buyers. A customer might order a CBD tincture, receive it, then dispute the charge, leaving you to foot the bill.
The Domino Effect of High Chargeback Rates
Excessive chargebacks don’t just drain revenue, they trigger penalties from payment processors.
CBD businesses labeled “high-risk” already face steep processing fees, and repeated disputes can lead to account termination.
Worse, Visa and Mastercard’s chargeback monitoring programs impose fines and restrictions, pushing you into a financial death spiral.
How CBD Businesses Can Fight Friendly Fraud (And Win)
Instant Alerts When a Dispute is Made
Chargeback alert systems notify businesses of disputes before they escalate.
Services like Ethoca or Verifi give CBD merchants a 24–72-hour window to refund the transaction or submit evidence, effectively reversing the dispute.
For example, if a customer claims a CBD cream never arrived, you can provide tracking proof to the bank swiftly, avoiding a costly chargeback.
Response to Chargeback Notifications
When a chargeback is initiated, your response is critical. Respond immediately and comprehensively. Provide all transaction documentation, including shipping proof and delivery confirmation. Clearly demonstrate that the product was exactly as described.
A swift, detailed response can prevent chargeback conversion and protect your merchant account. Timely and thorough communication shows payment processors and credit card companies that you are a responsible, transparent merchant.
The Power of Early Resolution
Proactively addressing disputes preserves revenue and customer relationships. Refunding a contested CBD oil order is cheaper than absorbing a chargeback fee plus product loss.
Early resolution also keeps chargeback ratios below the 1% threshold, ensuring continued access to payment processing.
Proactive Documentation Strategies
Detailed product documentation is your first line of defense. Create comprehensive product descriptions that explicitly outline the exact product contents, expected effects, precise shipping timelines, and clear return and refund policies.
Capture customer acknowledgment of these details during the purchase process. Screenshot or save order confirmations that demonstrate the customer’s full understanding of the product. This documentation becomes critical evidence if a dispute arises.
Communication is Key
Develop a robust customer communication system that addresses potential disputes before they escalate. Provide immediate order confirmations, send detailed shipping notifications, follow up with delivery confirmation, and offer easy customer support channels.
Quick and transparent communication reduces the likelihood of customers initiating chargebacks out of frustration or confusion. Every interaction is an opportunity to build trust and prevent potential friendly fraud.
Understanding Customer Motivation
CBD-specific friendly fraud frequently results from misunderstandings about product effects, confusion about legal status, unexpected shipping delays, or products not meeting subjective expectations.
By anticipating these concerns, merchants can proactively address potential dispute triggers. This might mean providing additional product education, setting clear expectations, or offering more detailed pre-purchase information.
FastoSafe: Advanced Fraud Protection for CBD Merchants
FastoSafe delivers comprehensive CBD fraud prevention tailored to high-risk industries like CBD sales. Our multi-layered CBD friendly fraud solution combines cutting-edge technology with deep transactional intelligence.
Identity Verification and Liability Protection
Our core technology uses 3D Secure 2.0 authentication, which strategically shifts financial liability from merchants to card issuers. This advanced verification method goes beyond traditional security measures by creating a dynamic, intelligent screening process.
Intelligent Transaction Monitoring
Our artificial intelligence system learns and understands each business’s unique transaction patterns. By analyzing device fingerprints, geolocation data, and behavioral signals, we can instantly identify and block suspicious activities before payment processing occurs.
Comprehensive Threat Detection
Daily transaction monitoring allows us to rapidly identify potential fraud indicators. Our system flags unusual transactions including payments from unexpected locations, address mismatches, and potential duplicate charges. For physical retailers, we support EMV chip technology that generates unique transaction codes, rendering counterfeit cards ineffective.
Secure Data Protection
End-to-end encryption shields customer information during both transmission and storage. This approach prevents unauthorized data interception while building crucial customer trust in your payment ecosystem.
Proven Results
Merchants utilizing FastoSafe typically experience a 70% reduction in chargebacks within the first two months. We offer a free fraud assessment to demonstrate our potential impact on your business.
Ready to Protect Your Revenue?
Contact FastoSafe for a personalized fraud prevention strategy designed specifically for your CBD business.
