In a shift that’s raising alarms across the financial world, first-party fraud has officially become the most common type of fraud globally, according to a new report from PaymentsJournal and Javelin Strategy & Research.
The findings are part of a sweeping fraud trend update that shows traditional third-party schemes, like stolen card usage and identity theft, are no longer the top concern for financial institutions. Instead, it’s the cardholders themselves.
Banks Say It’s the Hardest Fraud to Fight
The data paints a clear picture: 52% of banks and credit unions now say first-party fraud is their single biggest fraud-management challenge. That figure puts it ahead of synthetic identity fraud, phishing, and account takeovers combined.
First-party fraud includes any instance where a legitimate customer lies about a transaction, claiming it was unauthorized, the item never arrived, or they never made the purchase. While sometimes called “friendly fraud,” the financial impact is anything but.
Javelin’s research notes that the rising rates are being driven by economic pressure, opportunistic customers, and the increasing ease of filing disputes through mobile banking apps.
Merchants Are Feeling the Heat
While much of the fraud starts with banks and cardholders, the cost is falling heavily on merchants. Since first-party fraud mimics real purchases, most existing fraud detection systems don’t catch it. And when it turns into a chargeback, the merchant is left to fight an uphill battle.
Many businesses are now losing legitimate sales to disputes that don’t qualify as true fraud but still result in forced refunds. According to the report, this is contributing to an industry-wide spike in chargeback rates, especially in high-volume eCommerce and digital goods.
Pressure Is Mounting to Shift Liability
Javelin's researchers say that some issuers and networks are exploring new ways to handle this type of fraud, including tracking dispute frequency across accounts and redefining what counts as legitimate cardholder behavior.
There’s also growing conversation around whether merchants should continue bearing the full cost when a customer abuses the dispute process. But for now, few protections exist.
“First-party fraud doesn’t look like fraud to most systems,” the report notes. “That makes it difficult to flag and even harder to prevent.”
Businesses Need Fast, Preventive Tools
As the fraud landscape shifts, experts are warning merchants not to rely solely on traditional fraud filters or post-dispute recovery. The emphasis is now on early detection and real-time mitigation, especially for repeat chargeback offenders.
Catch First-Party Fraud Before It Becomes a Chargeback
At Chargeblast, we build tools designed for today’s fraud reality. Our platform gives merchants instant alerts when disputes are filed, lets you refund or respond before the chargeback hits, and automates high-quality evidence that banks actually consider.
With first-party fraud on the rise, prevention starts with better visibility. Stop chargebacks before they drain your revenue.
