Friendly fraud is a real customer disputing a legitimate purchase with their bank instead of asking the merchant for a refund. Mastercard's 2025 research puts first-party fraud at about 20 percent of disputes, and 48 percent of consumers have disputed a charge they later realized was legitimate.
The dispute that is not a crime, and the one that is
Friendly fraud has two faces, and they need different responses. The first is confusion: the customer does not recognize the charge, or forgot the purchase, or did not know a subscription renewed. Mastercard and Datos Insights found 48 percent of consumers have disputed a charge they later realized was legitimate. That is not fraud, it is a communication failure, and it is fixable.
The second face is deliberate: the customer received the goods, or used the service, and disputes the charge to get the money back anyway. That is first-party fraud, and it is growing. Sift's data has first-party fraud jumping from 15 percent of reported fraud to 36 percent, and the total exposure at $132 billion for ecommerce. The two faces look identical to the bank, which is why they are so hard to fight.
Why the numbers keep climbing
Three forces are pushing the numbers up. First, disputing has become easy: 77 percent of retailers believe disputing a transaction has become too easy, and 83 percent of issuers say increasing customer awareness of the dispute process is driving rising chargeback volumes. Second, the amounts are small enough to feel consequence-free: the average retailer chargeback value is $94, according to Mastercard's 2026 research, and a $94 dispute feels like a refund, not a crime.
Third, the volume is compounding. Mastercard projects annual chargeback volume will reach 334 million by 2028. Chargebacks911's survey found 72 percent of merchants reported an increase in friendly fraud chargebacks in 2024. The trend is not a spike, it is a slope, and the slope points up.
The evidence that wins the dispute
Winning a friendly fraud dispute is an evidence problem, and the evidence has to be collected at checkout, not after the dispute lands. Visa's CE3.0 and Mastercard's First-Party Trust let merchants win disputes, but only if they logged the customer's IP address or device ID at checkout and kept it for 13 months. Without that log, the merchant has no proof the customer was there.
The evidence package is specific: the IP address and device ID, the delivery confirmation with the address, the customer's purchase history, and the communication record showing the customer used the product or the service. A merchant who can show the device, the delivery, and the usage wins. A merchant who can only show the order loses, because the bank sees a charge and a complaint, and the complaint is the only story with a name on it.
Stopping it before the bank gets involved
The cheapest win is the one that never becomes a chargeback. Verifi alerts for Visa and Ethoca alerts for Mastercard warn the merchant when a cardholder disputes a charge, before it becomes a full chargeback, and the merchant can refund then. Deploying both together reduces chargebacks by up to 80 percent, and Ethoca alone has prevented more than 110 million chargebacks since 2011, including 39 million in 2025.
The other fix is clarity at the point of charge. Ethoca Consumer Clarity puts recognizable purchase details, the retailer name, the logo, the transaction information, into the issuer's banking app, so the customer recognizes the charge instead of disputing it. Almost half of friendly fraud starts with a charge the customer did not recognize. Make the charge recognizable, and the dispute never happens.
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Frequently asked questions
What is friendly fraud?
Friendly fraud, or first-party fraud, is when a real customer disputes a legitimate purchase with their bank instead of asking the merchant for a refund. It ranges from genuine confusion about a charge to deliberate abuse of the dispute process.
How much of chargeback volume is friendly fraud?
Mastercard's 2025 research puts first-party fraud at about 20 percent of disputes, and other industry estimates run higher, up to 75 to 86 percent of chargebacks. Sift has first-party fraud growing from 15 percent to 36 percent of reported fraud.
How do I win a friendly fraud dispute?
Collect the evidence at checkout: the IP address and device ID, the delivery confirmation, the purchase history, and the communication record. Visa CE3.0 and Mastercard First-Party Trust require the IP or device ID logged and kept for 13 months.
What are Verifi and Ethoca alerts?
Verifi is Visa's alert network and Ethoca is Mastercard's. They warn the merchant when a cardholder disputes a charge, before it becomes a full chargeback, so the merchant can refund first. Deploying both together reduces chargebacks by up to 80 percent.