Internal Fraud Hits 1 in 4 Merchants as Chargebacks911 Warns of Seasonal Hiring Risks

New data reveals that a significant portion of the payments industry is overlooking a critical security vulnerability: their own staff. For fintech professionals managing risk, the revelation that nearly 25% of merchants have faced employee-initiated fraud suggests that current defensive architectures, heavily weighted toward external perimeter threats, are fundamentally misaligned with modern operational realities.

What was announced

Chargebacks911 has released the 2026 Chargeback Field Report, a study based on proprietary survey data from more than 250 merchants. The findings highlight a stark disconnect between merchant security investments and the actual sources of financial loss. While the industry has focused on AI detection, behavioral biometrics, and 3D Secure to block external attackers, the report found that one in four merchants has experienced fraud initiated by employees or through in-house collusion.

The scale of the oversight is significant. Fewer than 40% of surveyed merchants actively monitor for internal fraud, and 53.5% either do not know if the problem is being tracked or confirmed that no monitoring exists. This vulnerability is particularly acute during seasonal hiring spikes, such as back-to-school periods, when temporary staff gain access to payment systems, refund protocols, and sensitive customer data under compressed onboarding timelines.

Internal fraud often manifests as "friendly fraud" collusion, where an employee directs a buyer to file a chargeback instead of a standard refund, sharing the resulting funds. It can also stem from non-malicious process failures, such as incorrectly handled refunds that trigger a customer dispute. To combat this, Chargebacks911 is positioning its Unified Dispute Management System (UDMS) and ResolveLab tool to provide real-time visibility across the full dispute lifecycle, using machine learning to flag patterns that individual case reviews typically miss.

"The assumption behind most fraud prevention strategies is that the threat is outside the building. That assumption determines which data gets monitored, which patterns get flagged and, just as importantly, which risks never get questioned. Internal fraud is effective because it operates inside the perimeter that assumption creates. It doesn't bypass controls. Managing internal fraud isn't a matter of suspicion but rather of architecture. Merchants need continuous visibility across dispute activity to identify unusual patterns before unexplained losses become accepted as part of doing business."

Donald Kossmann at Chargebacks911.

The companies involved

Chargebacks911 is a global leader in dispute resolution and chargeback management. The company specializes in providing merchants with the tools and data analytics necessary to identify the root causes of payment disputes, whether they stem from criminal fraud, consumer "friendly fraud," or internal merchant errors. By offering a comprehensive view of the dispute lifecycle, the firm aims to reduce the financial impact of chargebacks, which often include the loss of the transaction value, the physical goods, and additional processing fees.

The company is led by Monica Eaton, who serves as Founder and CEO. Under her leadership, Chargebacks911 has focused on the intersection of technology and human behavior to solve complex payment challenges. The firm operates in a market where merchants are increasingly squeezed by rising dispute volumes and sophisticated fraud tactics. By developing proprietary systems like the Unified Dispute Management System (UDMS), Chargebacks911 has positioned itself as a critical partner for retailers looking to protect margins in an era of high-volume digital commerce and complex global supply chains.

What FF News has reported before

FF News has closely followed the escalating chargeback crisis throughout 2026. Earlier this year, we covered how the Friendly Fraud Crisis saw 83% of enterprise merchants reporting surging losses. This trend was further detailed in reports showing that 83% of enterprise merchants report a surge in friendly fraud, a phenomenon that is now driving up consumer prices as 38% of merchants pass these costs to shoppers. Additionally, we highlighted operational failings in our report on the Subscription Trap Warning, where a quarter of merchants failed to send billing reminders, further exacerbating dispute risks.

What this means

This report moves the needle by shifting the narrative from "us vs. them" to a more uncomfortable "us vs. ourselves." For years, the fintech industry has sold the promise of the "impenetrable fortress," but this data suggests the gates are being left unlocked from the inside. Merchants are under immense pressure to scale quickly during peak seasons, and this research proves that operational speed is currently coming at the expense of integrity. The industry should watch for a shift in fraud tech procurement; the next generation of tools will likely focus less on blocking IPs and more on auditing internal workflows and employee-triggered anomalies. If merchants don't address the "keyholders," no amount of AI at the door will save their margins.