Friendly fraud is intensifying across the payments landscape, with more than 83 per cent of enterprise merchants reporting an increase over the past three years, according to the newly released 2026 Chargeback Field Report from Chargebacks911.
The findings show that friendly fraud—a term for when a cardholder disputes a legitimate transaction—is no longer being treated as an isolated loss or occasional cost of doing business. Nearly three-quarters of merchants, or 74.4 per cent, now describe it as a moderate or significant concern. Among respondents who reported a change in first-party fraud over the past three years, 73.7 per cent said the problem had increased. The figure rises to 83.4 per cent among enterprise merchants.
According to LexisNexis’ Cybercrime Report, first-party fraud has surpassed scams as the leading form of fraud globally.
“Friendly fraud has moved from being a back-office inconvenience to a material business risk,” said Monica Eaton, founder and CEO of Chargebacks911. “It is influencing pricing, customer policies, staffing decisions and the economics of digital commerce. The problem is growing faster than many merchants’ ability to identify, measure and manage it.”In many cases, the effects of chargebacks are being passed on from merchants to their customers.
More than 61 per cent of respondents say chargebacks have increased over the past three years. Meanwhile, 38 per cent say the costs associated with chargebacks have influenced the prices of their goods or services, up from 32.5 per cent in the previous report.
The cost of chargebacks can include lost merchandise, lost transaction revenue, chargeback fees, fraud-prevention expenses and the labor required to investigate and respond to disputes.
“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,” added Eaton. “Refund abuse adds even more pressure by exploiting the customer-friendly processes merchants put in place to prevent disputes.”
Refund abuse is creating an additional source of pressure. Merchants estimate that abusive requests account for 27.1 per cent of all returns, while 62 per cent describe refund abuse as a moderate or significant concern.
The 2026 Chargeback Field Report expands its analysis to include AI adoption, buy now, pay later (BNPL) transactions, internal fraud and the effects of Visa’s Acquirer Monitoring Program (VAMP).
More than one-quarter of merchants, or 26.7 per cent, say they currently use AI-based fraud prevention tools, while another 37 per cent plan to adopt them. Combined, nearly two-thirds of respondents are either using or preparing to use AI in their fraud-prevention strategies.
At the same time, merchants are navigating substantial changes to card network monitoring requirements. One in five says changes associated with VAMP have directly affected their business, while nearly one-third do not know whether they have been affected. Only 26.8 per cent say they actively monitor TC40 fraud records to help track their VAMP ratio.
Alternative payment methods are introducing additional considerations. Approximately 19.1 per cent of merchants surveyed accept BNPL payments. However, nearly four in 10 respondents believe BNPL can increase chargeback exposure.
The 2026 Chargeback Field Report also highlights significant operational shortcomings when it comes to merchants’ chargeback management processes.
Only about 34 per cent of respondents say they have a dedicated chargeback team or department head, while fewer than 30 per cent use any form of third-party assistance. These internal responsibilities often fall to employees in finance, operations or customer service who may not have specialized knowledge of card network regulations, evidence requirements or representment procedures.
Transaction evidence is also dispersed across payment gateways, customer service platforms, customer relationship management systems, order management software and other data sources. Approximately 23.5 per cent of merchants report using five or more separate tools to investigate disputes or compile representment evidence.
Fewer than one in four merchants describe their teams as “very” up to date on card network rules. Small businesses report the lowest confidence, with just 17.4 per cent saying they feel very informed.
The report also examines risks originating inside merchant organizations. Nearly one-quarter of respondents report experiencing employee-initiated fraud or in-house collusion, yet fewer than four in 10 say they actively monitor for it.
“Merchants are being asked to manage a rapidly changing risk environment with limited staff, disconnected systems and incomplete visibility into where their losses originate,” said David Pirtle, Vice President of Enterprise Engagement for Chargebacks911. “That is why reliable industry benchmarks are so important. This report gives merchants a clearer way to identify operational gaps, compare their performance with the wider market and determine whether their chargeback strategy is actually protecting revenue.”
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