Friendly Fraud Crisis: Chargebacks911 Warns Merchants Are Underestimating Losses by Half

Merchants are significantly underestimating the prevalence of friendly fraud, often misidentifying it as criminal activity. New data suggests that while businesses believe first-party misuse accounts for less than half of disputes, the actual figure could reach 86%. This misdiagnosis risks misallocating fraud prevention budgets and leaving retailers vulnerable during peak trading periods.

What was announced

Chargebacks911 has released its 2026 Chargeback Field Report, highlighting a massive discrepancy between merchant perception and the reality of dispute origins. While merchants surveyed estimate that friendly fraud—also known as first-party misuse—accounts for an average of 43.8% of their total chargebacks, external data suggests a far more severe situation. The report cites Visa data indicating the figure could be as high as 75%, while Chargebacks911’s own internal datasets place it at 86%.

This gap suggests that many businesses are making critical investment decisions based on an incomplete understanding of their loss landscape. The research reveals that 74.4% of merchants now consider friendly fraud a moderate or significant concern. Among enterprise-level merchants, 83.4% of those who noted a change in fraud patterns reported an increase in friendly fraud over the last three years. This trend is corroborated by the British Retail Consortium, which found that when specialist teams at HSBC, Lloyds, and Barclays reviewed suspected first-party fraud cases, they confirmed evidence of misuse or warranted further investigation in 83% of instances.

To address this visibility gap, the report advocates for the integration of transaction and dispute data through machine learning. Chargebacks911 highlighted its Unified Dispute Management System (UDMS) and ResolveLab as tools designed to provide the continuous performance measurement necessary to distinguish between criminal fraud and legitimate customer confusion or deliberate abuse. The challenge is particularly acute for online merchants, where legitimate purchases can become chargebacks weeks after the original transaction.

"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. 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."

Monica Eaton, Founder and CEO of Chargebacks911.

The companies involved

Chargebacks911 is a prominent player in the dispute resolution and chargeback management sector. Headquartered in Florida and with a significant global presence, the company provides specialized technology designed to help merchants identify the root causes of disputes and recover lost revenue. It operates as a subsidiary of Global Risk Technologies, a parent organization that focuses on risk management and mitigation strategies for the payment industry. Since its inception, Chargebacks911 has positioned itself as a bridge between merchants and financial institutions, aiming to streamline the often-confrontational dispute process.

The company’s market position is built on its ability to process vast amounts of transaction data to differentiate between "true fraud"—where a criminal uses stolen credentials—and "friendly fraud," where the cardholder themselves initiates a dispute without a valid legal reason. By offering tools like the Unified Dispute Management System, the firm attempts to centralize data that is typically siloed across different departments within a retail organization. As a global leader in this niche, the company frequently publishes industry benchmarks and research reports that track the evolving nature of post-transactional risk in the e-commerce ecosystem.

What FF News has reported before

FF News has followed Chargebacks911’s warnings regarding the evolving fraud landscape throughout 2026. In September, we covered the Golden Quarter Risk: 33% of Merchants Unaware of Visa VAMP Impact, Chargebacks911 Warns, which highlighted merchant unpreparedness for new regulatory frameworks. This followed an August report on how Internal Fraud Hits 1 in 4 Merchants as Chargebacks911 Warns of Seasonal Hiring Risks. Earlier in the year, the publication explored the consumer impact of these trends in Chargeback Fraud Driving Up Consumer Prices: 38% of Merchants Now Passing Dispute Costs to Shoppers. Furthermore, our July coverage of the 83% of Enterprise Merchants Report Surge in Friendly Fraud as Chargeback Costs Drive Up Prices provided early indications of the rising tide of first-party misuse that the latest field report now quantifies in greater detail.

What this means

This data highlights a fundamental crisis of visibility in the payments industry. If merchants are misidentifying up to 40% of their disputes, then the billions currently being poured into front-end AI fraud prevention are being targeted at the wrong end of the transaction lifecycle. This puts traditional fraud prevention vendors under pressure to prove they can handle post-transactional behavior, not just pre-authorization checks. The industry is moving toward a reality where "friendly fraud" is no longer a fringe nuisance but the primary driver of e-commerce loss. The open question for the sector is whether banks and merchants can move past their historically adversarial relationship to share the data necessary to solve this shared problem.