Retailers have mostly battled chargebacks as a by-product of card payments. Traditionally, disputes stemmed from stolen cards or unauthorised transactions. But the landscape is shifting. A growing proportion of chargebacks now come from so-called ‘friendly fraud’, where legitimate customers dispute valid purchases, either by mistake or deliberately. This trend is proving costly for merchants, driving up dispute volumes, eroding margins, and threatening customer trust…
The Rise of Friendly Fraud
Friendly fraud, also known as first-party misuse, happens when a cardholder makes a purchase but later claims it was unauthorised, or disputes the charge for convenience. Sometimes it’s accidental, such as a forgotten subscription renewal, or a family member using a card. Increasingly, however, it is intentional, with customers abusing the chargeback system as a way of securing ‘free’ goods or services.
Industry studies suggest that friendly fraud now accounts for more than half of all chargebacks in sectors like digital goods, subscription services, and fast-moving e-commerce. Unlike third-party fraud, it is notoriously difficult to detect or prevent.
The Financial Impact
The true cost of chargebacks extends far beyond the disputed amount. Merchants face card network fees, lost stock, operational overhead from case management, and reputational damage with issuers. High chargeback ratios can even result in penalties or removal from preferred payment programmes.
For retailers operating on slim margins, the impact is severe. Chargeback losses are forecast to reach billions globally by 2026, with UK merchants bearing a growing share.
Strategies for Tackling Friendly Fraud
While friendly fraud is complex, there are emerging solutions:
- Enhanced data transparency: Tools that provide clear transaction descriptors, digital receipts, and subscription reminders reduce accidental disputes.
- AI-driven risk scoring: Analysing behaviour patterns, device fingerprints, and purchase histories helps flag high-risk customers before authorisation.
- Compelling evidence: Automation platforms now consolidate delivery confirmations, login records, and customer communications to strengthen representment cases.
- Customer education: Clear refund policies and proactive communication about billing reduce misunderstandings.
Merchants are also working more closely with issuers and acquirers to share intelligence and fast-track legitimate disputes, while filtering out misuse.
Looking Ahead
Friendly fraud is not going away. As consumer expectations for instant refunds rise, and digital commerce grows more frictionless, opportunities for misuse increase. For senior anti-fraud professionals, the priority is to balance customer experience with robust dispute management, investing in tools that protect margins without alienating genuine buyers.
In 2026, navigating chargebacks will require more than reactive firefighting: it will demand a strategic, data-led approach to protect revenue and preserve trust in an increasingly complex payments ecosystem.
Are you searching for Chargeback solutions for your organisation? The Fraud Prevention Summit can help!
Photo by Vitaly Gariev on Unsplash
