Addressing Friendly and Malicious Chargeback Fraud

Whether friendly or malicious, chargeback fraud remains a significant challenge for merchants of all types, necessitating effective chargeback management strategies. Chargeback fraud continues to escalate, creating major financial risks for merchants. Global chargeback volume is projected to reach about 337 million cases a year by 2026, while losses from card-not-present fraud are expected to rise to around US $28.1 billion.

Businesses may also lose roughly US $15 billion to fraudulent chargeback claims in 2025 alone.

Friendly fraud remains the primary driver of disputes, accounting for over 70% of all chargebacks in 2025, underscoring the need for stronger, preventative fraud-management strategies.

There are ways to control the incidence of friendly and malicious chargeback fraud and as a result, some of these costs. Here, takes a look at both kinds of chargeback fraud and explores means of minimizing them.

What Is Friendly Chargeback Fraud?

Friendly chargeback fraud is chargeback fraud that really isn’t intentional. It typically occurs when a customer files a chargeback instead of trying to first obtain a refund from the merchant. Sometimes this happens because the consumer doesn’t understand the differences between a traditional return and a bank-issued refund and/or believes that initiating a chargeback via the bank (which will force the merchant’s hand to issue the refund) will lead to a faster resolution.

Additionally, friendly chargeback fraud sometimes results when a customer forgets about a purchase. It can also be the outcome when a consumer agrees to recurring billing (for example, for digital services) but is genuinely unaware of what he or she was agreeing to in the first place.

What Is Malicious Chargeback Fraud?

Malicious chargeback fraud is when a consumer requests a chargeback with the intention of receiving a return of the transaction dollar amount, while also keeping the merchandise or continuing to use the service. This is a form of “cyber-shoplifting”.

Fraudsters use many different excuses to justify a malicious chargeback fraud attempt. Some claim that the item or service was never delivered or was not as described (e.g., counterfeit merchandise, wrong color, wrong size, or subpar quality). Others say the merchant failed to cancel their recurring payment when requested, or that the original transaction wasn’t authorized.

How Can Merchants Minimize the Incidence and After-Effects of Chargeback Fraud?

There are a few things merchants can do to prevent or at least minimize the number of friendly chargebacks they face and must shoulder. It should start with the customer: According to NerdWallet, many consumers will think twice about immediately initiating a chargeback at least, as the first line of defense if they know what the cost to the merchant may be. Many simply are unaware that an incident of friendly chargeback fraud no matter how “innocent” has repercussions for merchants.

Ensuring that billing descriptors are easily recognizable may also help with friendly chargeback fraud. Merchants would also do well to keep well-organized paper trails of all transactions, communicate regularly with customers, and grant refunds and cancellations as soon as they are requested. Messages either printed messages that accompany bills or merchandise ordered for delivery or online messages for customers purchasing digital services can be used to remind consumers to contact the merchant first before filing a dispute with the bank.

Digital service providers and those offering a recurring payment schedule should incorporate into their messages instructions to read the “fine print” before agreeing to payments. This way, they will be less likely to question the validity of these payments later.

As for malicious chargebacks, merchants can look at their records to find patterns of repeat offenses. Blacklisting customers is a common practice, too. Although it is a serious consequence, it is the right response to what amounts, as we mentioned above, to the theft of merchandise or services.

Having the right payment processing solutions in place may also have a positive impact on the incidence of friendly and malicious chargeback fraud. Schedule a consultation to find out more.