Friendly Fraud Now Hits 83% of Enterprise Merchants, Reshaping Dispute Strategy

Friendly fraud, the practice of disputing a legitimate card transaction as unauthorized, has increased over the past three years for 83.4% of enterprise merchants, according to the 2026 Chargeback Field Report from dispute management firm Chargebacks911. Across all merchant sizes, 73.7% of respondents who tracked a change in first-party fraud reported an increase, and 74.4% now call it a moderate or significant concern.

The report, built from survey responses from more than 250 merchants, lands as global data confirms the underlying trend. The 2026 LexisNexis Risk Solutions Cybercrime Report found first-party fraud, which includes friendly fraud, made up 38.3% of reported global fraud in 2025, remaining the leading fraud category worldwide for a second consecutive year. That share varies sharply by region: over half of fraud reported in EMEA is first-party, compared with under 10% in Latin America, where synthetic identity fraud dominates instead.

What Is Driving the Rise in Friendly Fraud?

Three forces are compounding at once: rising dispute volumes, new card network monitoring rules, and merchants' own operational gaps.

On volume, 61% of merchants say chargebacks overall have increased in the past three years, and refund abuse, transactions where customers exploit lenient return policies rather than dispute a charge outright, now accounts for an estimated 27.1% of all returns. Sixty-two percent of merchants describe refund abuse itself as a moderate or significant concern, a related but distinct problem from card-based friendly fraud.

On monitoring, Visa replaced its separate fraud and dispute programs with the unified Visa Acquirer Monitoring Program (VAMP) in April 2025, folding TC40 fraud reports and TC15 disputes into a single ratio that acquirers and merchants must keep below defined thresholds or face per-transaction fines. The Chargebacks911 data shows how unevenly that transition has landed: only one in five merchants says VAMP has directly affected their business, nearly a third do not know whether it has, and just 26.8% actively monitor their TC40 fraud records, the exact data point the VAMP ratio is built on. Enforcement has already tightened once, with merchant thresholds set to fall further from 2.2% to 1.5% in most regions.

Why Are Chargeback Costs Reaching Consumers?

Merchants are not absorbing the cost quietly. Thirty-eight percent say chargeback-related costs are now influencing the prices of their goods or services, up from 32.5% in the prior year's report. Chargebacks911 founder and CEO Monica Eaton attributed this to compounding costs beyond the disputed transaction itself: "Chargebacks rarely cost merchants only the value of the original transaction. Once all factors are considered, the financial impact can multiply quickly and honest customers ultimately absorb part of that burden through higher prices or stricter policies."

Each disputed transaction can carry lost merchandise, lost revenue, a chargeback fee from the card network or acquirer, and the labor cost of investigating and contesting the claim, a cost stack that scales with dispute volume regardless of whether the underlying claim is legitimate.

How Are Merchants Responding With Technology?

Adoption of AI-based fraud tools is accelerating from a low base. Just 26.7% of merchants currently use AI-based fraud prevention, but another 37% plan to, putting nearly two-thirds of the market on a path toward automated detection. That shift coincides with a separate trend flagged in LexisNexis's 2026 data: agentic traffic, automated agents transacting on a consumer's behalf, rose 450% globally between January and December 2025, a pattern that will complicate fraud models built to distinguish only humans from bots.

Buy now, pay later transactions add a further variable. Only 19.1% of surveyed merchants currently accept BNPL, but nearly 40% believe it increases chargeback exposure, a concern consistent with LexisNexis's finding that BNPL providers are among the sectors reporting the sharpest rise in first-party fraud.

Where Are the Operational Gaps?

The report's starkest findings are internal. Only about 34% of merchants have a dedicated chargeback team or department head, and fewer than 30% use third-party dispute management support, leaving the work to finance, operations, or customer service staff who often lack specialized knowledge of card network rules or representment procedures. Evidence itself is scattered: 23.5% of merchants report using five or more separate systems, spanning payment gateways, CRM platforms, and order management software, just to compile a single dispute response. Fewer than one in four merchants call their teams "very" up to date on card network rules, and confidence drops further among small businesses, where only 17.4% say the same.

Internal fraud compounds the exposure. Nearly a quarter of merchants report experiencing employee-initiated fraud or in-house collusion, yet fewer than 40% actively monitor for it.

David Pirtle, Chargebacks911's Vice President of Enterprise Engagement, framed the report as a benchmarking tool for an increasingly fragmented problem: "Merchants are being asked to manage a rapidly changing risk environment with limited staff, disconnected systems and incomplete visibility into where their losses originate. That is why reliable industry benchmarks are so important."

Why This Matters to FinanceX Readers

For payments executives and investors, this data points to a structural cost center, not a cyclical one. VAMP's tightening thresholds mean acquirers will increasingly price fraud and dispute exposure into merchant relationships, and the 26.8% TC40 monitoring rate suggests most merchants cannot yet see the metric that determines their standing.

For investors tracking the fraud-prevention and payments infrastructure space, the gap between AI adoption intent (63.7% combined current use and planned adoption) and actual deployment represents a near-term product and services opportunity, particularly for vendors offering consolidated dispute-evidence tooling that addresses the five-plus-system fragmentation merchants report today.