TL;DR:
- Friendly fraud now represents 75% of chargebacks, up from 34% in 2023
- High-risk merchants face unique challenges from recurring billing confusion and privacy concerns
- Prevention beats fighting: clear descriptors, instant receipts, and easy refunds stop disputes
- New 2025 tools like Visa’s Compelling Evidence 3.0 help merchants win disputes
- Strategic frameworks help categorize disputes by intent and authorization status
Who this helps: Payment operators, risk managers, and founders in high-risk verticals dealing with rising chargeback rates.
What Is “Friendly Fraud” and Why Is It Rising?
Friendly fraud refers to customers filing chargebacks on legitimate purchases; it’s surging in 2025 as online shopping and easy dispute processes expand.
What “Friendly Fraud” Means
Friendly fraud happens when a customer disputes a charge they actually authorized. They might claim the item wasn’t delivered. They could say their card was stolen. But in reality, they received what they bought.
The term “friendly” is ironic. There’s nothing friendly about it for merchants. It’s called this to distinguish it from hostile third-party fraud.
Common examples include: A child buys game credits without permission. Someone claims a refund for a delivered product. A subscriber forgets about a renewal and disputes it.
Why It’s So Common Now
Several factors fuel the rise:
Ease of Disputes: Banks let customers dispute with a few taps. No questions asked initially. This convenience tempts people to choose chargebacks over contacting merchants.
E-commerce Boom: More online sales mean more dispute opportunities. Post-2020 digital shopping exploded. Chargebacks followed suit.
Consumer Attitudes: 40% of Americans know someone who committed friendly fraud. Social media “refund hacks” spread the behavior. TikTok videos teach how to get free items via chargebacks.
Weak Consequences: Consumers face little immediate penalty. The perceived risk is low. So the option gets abused.
Friendly fraud now accounts for 70-80% of all chargebacks. This is a complete inversion from a decade ago. It’s gone from rare anomaly to leading cause.
Why High-Risk Merchants Are Hit Hardest
“High-risk” verticals – from subscription boxes to online gaming – face above-average friendly fraud because of the nature of their products and customers.
High-risk merchants operate in industries with elevated chargeback rates. They often require special merchant accounts. Here’s why friendly fraud hits them harder:
Subscription Services (Nutraceuticals, SaaS): Customers forget recurring charges. They find cancellation difficult. So they call the bank instead. This is friendly fraud born from subscription fatigue.
Adult Entertainment and Content: Privacy concerns drive disputes. Cardholders deny charges to avoid embarrassment. Discreet billing descriptors can be too vague. Customers don’t recognize them.
Online Gaming & Digital Goods: Family fraud is huge here. Parents see game purchases and dispute them. Kids made the charges, but parents claim fraud. Digital goods get consumed instantly. Then unhappy customers chargeback as a “refund.”
Travel & Ticketing: Non-refundable bookings get disputed when plans change. Travelers claim fraud to recover money. High prices give more incentive to attempt chargebacks.
CBD & Nutraceuticals: Subscription confusion combines with buyer’s remorse. Product satisfaction issues lead to disputes instead of returns.
High-risk merchants face stricter chargeback thresholds. Usually 1% instead of 0.9%. Friendly fraud can push them over limits faster. They have less wiggle room.
Friendly Fraud vs. Chargeback Fraud: Know the Difference
Not all fraud is equal – friendly fraud involves a real customer and no stolen identity, whereas classic chargeback fraud involves outsiders and truly unauthorized charges.
Understanding the difference matters for your response strategy.
Chargeback Fraud (Third-Party): A criminal uses a stolen card. The chargeback is legitimate from the cardholder’s view. The merchant truly had no authorization from the real cardholder.
Friendly Fraud (First-Party): The cardholder made the purchase. Then they deny it later. The transaction was authorized by the legitimate card owner.
Key distinctions:
| Aspect | Friendly Fraud | True Fraud |
|---|---|---|
| Cardholder’s role | Did make the purchase, denies it later | Did not make the purchase |
| Intent | Ranges from accidental to intentional | Criminal intent |
| Evidence to fight | Prove delivery, customer agreement, prior transactions | Prove identity mismatch, location data |
This difference is crucial. Traditional fraud tools don’t stop friendly fraud. The person passes CVV checks. They are the rightful card owner. You need post-transaction strategies, not just upfront screening.
2025 Updates: New Rules & Tech High-Risk Merchants Must Know
Card networks have introduced new programs in 2025 (like Visa’s VAMP) and technologies (AI, purchase verification tools) to curb friendly fraud – savvy merchants should leverage these.
Visa VAMP (Visa Acquirer Monitoring Program): Visa replaced old monitoring with VAMP in April 2025. Acquirers get monitored portfolio-wide. Thresholds still matter. But now stricter enforcement exists. Networks are watching friendly fraud closely. The era of ignoring it is over.
Mastercard’s Initiatives: Mastercard’s 2025 report calls friendly fraud a hidden crisis. They’re urging better data sharing between banks and merchants.
Compelling Evidence 3.0: This Visa rule from 2023 helps merchants fight friendly fraud. You can auto-win certain disputes. Just show two prior successful transactions with the same customer. Same card, device, or address within 120 days wins the case.
High-risk merchants with repeat customers benefit greatly. Subscription sellers can use previous transactions as evidence. Check with your processor about implementing CE 3.0 requirements.
AI & Collaboration: AI tools now analyze dispute patterns. They flag likely friendly fraud cases. Some processors offer dispute-scoring services. Banks are showing detailed purchase info in apps. This deters unwarranted disputes.
Subscription Regulations: By 2025, clearer subscription disclosure is required. Easy cancellation is mandated by card network rules. High-risk merchants must comply. Non-compliance causes chargebacks.
How to Prevent Friendly Fraud – Before It Happens
Friendly fraud prevention is about foresight: confirm buyer identity, set clear expectations, and make it easy for customers to resolve issues with you (not the bank).
No single tool stops friendly fraud. But combining process tweaks with tools drastically reduces it.
Friendly Fraud Prevention Checklist
1. Use Clear Billing Descriptors Ensure the charge name on statements is recognizable. Include your website or phone number. This prevents “unrecognized charge” panic.
2. Send Immediate Order Confirmations Email or SMS customers the moment purchase completes. Summarize the order. If they forgot, this jogs memory. It’s also timestamped evidence.
3. Provide Delivery Tracking Give tracking info so customers know items are coming. After delivery, send a follow-up email. If they didn’t receive it, they’ll tell you.
4. Easy Refund/Return Process When customers can’t easily return products, they chargeback instead. Offer simple refund mechanisms. Better to refund than face chargeback fees.
5. Responsive Customer Service (24-48h) Respond to issues within a day or two max. Customers waiting for replies file chargebacks out of frustration.
6. Document Everything Keep records of interactions, delivery proofs, IP addresses. This deters repeat abusers. It helps win chargebacks.
7. Leverage Fraud Tools Wisely CVV checks, address verification, 3-D Secure still help. They ensure the purchaser is legitimate. They add liability shift protection.
8. Blacklist Abusers If customers file unwarranted chargebacks repeatedly, block them. One might be misunderstanding. Multiple attempts signal abuse.
9. Analyze and Adapt Review each chargeback. Ask “Could we prevent this?” If “item not received” is common, improve shipping. Treat chargebacks as feedback.
When Friendly Fraud Happens: Fighting Chargebacks the Smart Way
Not every chargeback should be fought, but when you do fight friendly fraud, come armed with evidence and use new tools for higher win rates.
Even with prevention, some friendly fraud slips through.
Decision Framework
Is the chargeback valid? If it was your mistake, don’t fight it. Accept, learn, and maybe reach out to apologize.
Is it friendly fraud? Everything was delivered and legitimate. Proceed to next question.
Is it worth fighting? Consider amount and fees. A $20 chargeback with $15 fees might not justify time. A $500 chargeback absolutely warrants fighting.
Do I have compelling evidence? Without proof, you’ll likely lose. With strong evidence (signed delivery, login records), you have ~43% win chance.
Customer history? First dispute from a good customer? Consider contacting them. Repeat offender? Fight it and cut ties.
The decision tree tells you: fight when you have a strong case and worthwhile value. Otherwise, focus on prevention.
Tips for Representment
Submit within deadlines: Typically 30 days or less. Mark your calendar.
Include a rebuttal letter: State facts clearly and briefly. “Customer downloaded software on Feb 1 and Feb 5 per IP logs.”
Provide compelling evidence:
- Delivery proof
- Order confirmation emails
- Customer login IP matching billing address
- Prior transaction records (triggers Visa CE 3.0)
Cite policies customer agreed to: Include screenshot of checkout terms acceptance.
Advanced Strategies: Frameworks to Outsmart Friendly Fraud
Adopt a strategic mindset: categorize disputes by type and intent, and tailor your prevention and response tactics accordingly – one size doesn’t fit all.
The 4 Fraud Categories
Category 1: Authorized + Unintentional Example: Customer forgot purchase or didn’t recognize descriptor. Approach: Education. Reach out and explain. These are winnable with information.
Category 2: Authorized + Intentional
Example: “Liar buyers” seeking free stuff. Approach: Strict. Fight with evidence. Blacklist afterwards. These are classic friendly fraudsters.
Category 3: Unauthorized + Unintentional Example: True fraud (stolen card). Approach: Traditional prevention. Strengthen filters, use 3-D Secure. Accept legitimate chargebacks.
Category 4: Unauthorized + Intentional Example: Organized crime, identity theft. Approach: Maximum vigilance. Work with banks, law enforcement. Invest in anti-fraud tools.
Friendly fraud falls primarily in Categories 1 and 2. Each requires different responses.
Aligning Tactics to Intent
Identify the dispute’s nature to respond appropriately. Long-time customer suddenly disputes? Likely Category 1 – approach friendly. Customer signs for package then disputes “not received”? Category 2 – approach firmly with evidence.
Collaboration & Data Sharing
Merchants are beginning to share data on friendly fraudsters. Services might alert if someone has dispute history elsewhere. High-risk merchants should watch for industry initiatives. Stay tuned to Merchant Risk Council efforts.
Take Command of Your Chargeback Defense—Today
Every day without systematic prevention costs you $685 in recoverable revenue while pushing your chargeback ratio closer to processor penalties.
Merchants winning this battle share three traits: automated defense systems catching disputes before escalation, real-time intelligence identifying patterns, and integrated platforms preventing losses while optimizing revenue.
Beast Insights delivers all three—stopping 85% of chargebacks through automated alerts while providing intelligence to recover 15-25% of lost revenue through smarter operations.
Conclusion: Taking Charge of Friendly Fraud
Friendly fraud isn’t going away, but high-risk merchants who combine prevention, customer education, and savvy dispute management can drastically reduce its impact.
Friendly fraud in 2025 is formidable but not insurmountable. Knowledge is power. Knowing 75% of your chargebacks might be friendly fraud helps justify prevention investment.
Implement the checklist. Treat friendly fraud prevention as ongoing process. Monitor, tweak, educate staff. High-risk merchants using these strategies saw chargeback rates drop from 1.5% to 0.8% within quarters.
High-risk merchants often feel at chargebacks’ mercy. But being proactive turns friendly fraud from constant drain into manageable business issue.
Remember: not-so-friendly fraud can be beaten with smart, friendly practices.
Evidence Box (for editorial reference):
| Claim | Source | Date | Takeaway |
|---|---|---|---|
| 75% of chargebacks are friendly fraud | Mastercard via Chargeflow | Apr 2025 | Friendly fraud is now majority of disputes |
| $132B annual cost to merchants | Mastercard report | 2025 | Massive financial impact globally |
| 79% of merchants hit in 2024 | Visa Acceptance Solutions | 2024 | Explosive year-over-year growth |
| Merchants win 8.1% manually | Mastercard via Chargeflow | 2025 | Low success rate without preparation |
| 43% win rate with strong evidence | Justt industry stats | 2025 | Preparation significantly improves outcomes |
