Merchants Are Bleeding Cash From Rising ‘Friendly Fraud’ by Customers

Consumers have often used an old consumer protection tool called a chargeback to protect themselves from purchase fraud but they’re now using it to commit their own fraud in greater numbers.A recent report from Juniper Research says that transactions from so-called friendly fraud, or first-party fraud, is expected to double in the coming years. This form of payment fraud occurs when a cardholder disputes a legitimate purchase, often to obtain a refund while keeping the goods or services.Common scenarios include saying goods weren’t received, disputing an item’s quality, or blaming another family member for making the purchase.“Friendly fraud is a silent drain on merchant profitability and one of the most underestimated risks in digital commerce,” Verifi’s general manager, Sara Craven, said in the report. That lost profitability is leading to increased charges on all customers, including those who have never disputed a charge.Juniper Research estimates that more than one in five chargebacks are believed to be fraudulent, and will cost retailers $8.1 billion this year. In five years, it expects the fraud to hit $16 billion a year.A survey by identity verification firm Socure found 35 percent of Americans admitted to committing friendly fraud and 40 percent said they knew someone who had done it.Friendly fraud’s growth is being driven by an increase in consumers perceiving it as a victimless crime. Online forums and social media content are explaining the process and help increase the practice, a firm that helps businesses fight fraud, Chargebacks911, noted in its 2026 field report.Juniper Research identified that chargebacks are more likely for e-commerce purchases because the cardholder and the merchant don’t have a relationship and have not met, making the consumer more comfortable filing fraudulent chargebacks.When customers fraudulently claim chargebacks, the merchant, not a bank or credit card company, generally incurs the losses. Visa is warning merchants about the growing problem. When goods are shipped and not returned, merchants not only lose inventory but additional fees can quickly push up dispute costs. Companies are having to spend more on administrative costs to investigate and respond to claims, forcing staff to concentrate on issues that are not their core business activities.“Given the costs of chargebacks, winning disputes is not enough — merchants must be proactive, or else they will suffer heavy fees,” Juniper Research senior analyst Michael Greenwood said.Visa says that dispute processes at some issuing banks can unintentionally make it easier for consumers to submit and win fraudulent claims. Cardholders can now reverse some transactions with a single tap on their phone or computer in a process that is sometimes easier than the actual purchase of the goods.Visa recommends that merchants implement systems to detect and deter friendly fraud. That would include monitoring customer accounts for abnormal behavior or multiple disputes.Juniper Research’s report also identified misunderstandings as another cause of growing chargeback volume. Goods and services purchased online often appear on bank statements under a different name to the merchant’s branding, leading to suspicion of fraud. The authors recommend that brands ensure banking app descriptions match the brand name to minimize confusion.

Merchants Are Bleeding Cash From Rising ‘Friendly Fraud’ by Customers

Merchants Are Bleeding Cash From Rising ‘Friendly Fraud’ by Customers

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