The Friendly Fraud Problem

Chargeback volumes tell the same story from a different angle. Chargebacks911, a chargeback management platform, tracks this closely. Their 2026 Chargeback Field Report projects global chargeback volume reaching 337 million transactions by 2026, up 41% from 2023.³ The Merchant Risk Council's Global Fraud Survey 2025 found that 64% of merchants reported increasing rates of first-party misuse, with more than one in four seeing increases of 25% or more.⁴

These are largely merchant-facing figures, but the implications run upstream. For issuers and acquirers, every disputed transaction requires investigation, often with limited information, under regulatory timelines that structurally favour the cardholder, and with no reliable way to distinguish a genuine fraud victim from someone exploiting the dispute process. 

The information asymmetry is structural. Issuers are, by design, positioned to advocate for their cardholders. PSD2 Article 73 requires institutions to refund unauthorised transactions; this is an obligation that is entirely appropriate when the customer is a genuine fraud victim. But it becomes considerably more complicated when they are not.⁶

A meaningful share of disputes arise from genuine confusion: a forgotten subscription renewal, a billing descriptor that does not match the merchant's trading name, a family member using a shared card. Chargebacks911 estimates that one in five consumers has at some point disputed a charge they actually authorised.³ These are not malicious customers; they are customers who did not recognise a legitimate charge and took the path of least resistance.

The deliberate cases are different in character, even if they look identical at the surface. A cardholder who disputes a purchase in full knowledge, retains the goods, and collects the refund is committing fraud, but the evidence required to demonstrate that is rarely available to the issuer at the point of dispute. Repeat behaviour is often the only reliable signal, and Chargebacks911 reports that 50% of first-time friendly fraudsters go on to repeat the behaviour within a staggering 60 days of a successful claim.³

The cost compounds accordingly. LexisNexis's True Cost of Fraud research calculates that US merchants lose $4.61 for every $1 of actual fraud when chargeback fees, operational costs, and lost inventory are included; this is a 32% increase since 2022.¹ The operational burden falls not only on merchants but on the issuers and acquirers that must process, investigate, and adjudicate each dispute.

The regulatory response so far has focused primarily on consumer protection: clearer billing descriptors, easier cancellation flows, faster dispute resolution timelines. In the UK, the Payment Systems Regulator's mandatory reimbursement rules are one example: 88% of in-scope APP fraud losses were reimbursed to victims in their first year, according to UK Finance's Annual Fraud Report 2026.⁹ These are reasonable measures that address the accidental end of the spectrum. They do not, however, address the deliberate end, and in some cases may inadvertently facilitate it, making the dispute process easier to initiate also makes it easier to abuse.

The industry's longer-term answer will require better data sharing between merchants and issuers at the point of dispute, so that prior transaction behaviour can be used as evidence when a claim does not hold up.