Friendly fraud could be twice as big as merchants think, warns Chargebacks911
Merchants could be significantly underestimating the proportion of chargebacks caused by friendly fraud, leaving businesses at risk of making fraud prevention and dispute management decisions based on an incomplete picture of where their losses originate, according to Chargebacks911, a global leader in dispute resolution and chargeback management.
The company’s 2026 Chargeback Field Report found that merchants estimate friendly fraud accounts for an average of 43.8% of their chargebacks. Yet Visa data cited in the report suggests the figure could be as high as 75%, while Chargebacks911’s own internal data puts it at 86%.
The figures are drawn from different datasets and should not be treated as a like-for-like comparison. But the scale of the gap points to a fundamental problem for merchants: identifying whether a chargeback stems from criminal fraud, legitimate customer dissatisfaction or first-party misuse remains extremely difficult and without that distinction, fraud prevention investment may be directed toward the wrong problems.
“If you think friendly fraud represents less than half your chargebacks when the real figure could be much higher, every decision built on that assumption is potentially miscalibrated,” said Monica Eaton, founder and CEO of Chargebacks911. “You can spend more on fraud prevention and still spend it in the wrong places. You are not managing the problem you have but the problem you think you have.”
Unlike criminal fraud, friendly fraud often begins with a legitimate transaction made by the genuine cardholder. The problem emerges later, when that transaction is disputed because of confusion, buyer’s remorse, refund frustration or deliberate abuse. That distinction makes first-party misuse particularly difficult to identify. A transaction can pass fraud checks precisely because the person, card and purchase are legitimate. When the chargeback subsequently arrives, the information available to merchants may still not clearly establish why it happened.
Chargebacks911’s research found that 74.4% of merchants consider friendly fraud a moderate or significant concern. Among enterprise merchants, 83.4% of those reporting a change said they had observed an increase in friendly fraud over the past three years.
The issue is gaining wider attention across the industry. The British Retail Consortium’s “Tackling Customer Fraud: Progress to Date” report found that when specialist bank teams at HSBC, Lloyds and Barclays reviewed cases that retailers suspected involved first-party fraud, banks confirmed evidence of first-party fraud or found sufficient evidence to warrant further investigation in 83% of cases reviewed.
For Eaton, the problem has significant consequences for how merchants allocate resources.
“Friendly fraud is not just being underestimated but completely misdiagnosed,” Eaton said. “Criminal fraud and first-party misuse can result in the same outcome for a merchant — lost revenue — but they do not begin in the same place and they cannot always be addressed in the same way. If businesses classify too much first-party misuse as criminal fraud, they risk investing more heavily in stopping the wrong threat while failing to challenge disputes they may have been able to prevent or contest.”
The warning comes as merchants prepare for the peak holiday trading period, when higher transaction volumes can increase exposure to fraud, refunds and subsequent disputes. The challenge is particularly acute for online merchants, where legitimate purchases can later become chargebacks weeks after the original transaction.
Closing the gap requires merchants to look beyond individual fraud decisions and build a clearer view of what is driving disputes over time. That means connecting transaction, customer and dispute data using AI and machine learning to identify patterns of first-party misuse that are invisible when cases are reviewed individually and continuously measuring outcomes across the full dispute lifecycle. Chargebacks911’s Unified Dispute Management System (UDMS) is designed to provide exactly that integrated view, while ResolveLab delivers the continuous performance measurement merchants need to understand whether their fraud investments are being directed at the right problems.
“More fraud technology will not solve a visibility problem on its own,” Eaton added. “Before deciding where the next dollar of fraud investment should go, merchants need confidence that they understand the problem they are actually paying to solve.”
With search interest in friendly fraud reaching an all-time high in 2026 and almost three-quarters of merchants now expressing moderate or significant concern, Eaton believes the industry has moved beyond debating whether first-party misuse is a serious problem.
“The question is whether businesses can see it accurately enough to respond,” she said. “You cannot invest intelligently against a problem you cannot measure.”
The complete 2026 Chargeback Field Report is available at https://chargebacks911.com/chargeback-field-report.