Chargebacks have always been a headache for merchants, but the 2025 Mastercard State of Chargebacks Report shows that the problem has shifted. The real culprit isn’t just fraudsters or banking errors—it’s the cardholders themselves. Known as first-party misuse or “friendly fraud,” these disputes now represent a concerning amount of all chargebacks, making them the single most common type of dispute worldwide. For merchants, this trend is quietly draining revenue and complicating payment operations more than ever.
What is First-Party Misuse?
First-party misuse happens when a customer disputes a transaction they actually made. Unlike traditional fraud, where a third party steals card details, friendly fraud involves the legitimate cardholder filing a chargeback. It can happen for many reasons—forgetting a purchase, misunderstanding the billing descriptor, buyer’s remorse, or even intentional abuse.
While it may not feel like criminal behavior to the cardholder, it’s still costly for merchants. Mastercard and industry analysts increasingly classify these disputes as fraudulent, even though the cardholder themselves initiated them.
21% of Chargebacks Are Friendly Fraud
According to Mastercard’s 2025 report, first-party misuse now accounts for 21% of all chargebacks. That makes it the leading type of dispute globally, surpassing traditional fraud and merchant errors.
Our recent analysis also confirms this trend, noting that first-party fraud has overtaken other categories to become the top threat merchants face today. The scale is significant: even small recurring disputes, when multiplied across thousands of transactions, can quietly eat into profit margins.
Why First-Party Misuse Keeps Growing
Several factors are fueling the rise of friendly fraud:
- Easy access to dispute tools: Banking apps and online portals make it simple for consumers to file disputes without contacting the merchant.
- Billing descriptor confusion: Customers often fail to recognize charges due to vague or unclear transaction descriptions.
- Subscription fatigue and forgotten purchases: Recurring payments, especially for digital services, frequently trigger disputes when a cardholder forgets they signed up.
- Consumer behavior: Many cardholders see dispute filing as a harmless way to reverse a charge, not as fraud.
It’s important to note that this isn’t just a problem for large merchants; in fact, any business accepting card payments can face friendly fraud, especially online. Digital commerce and mobile payments have made the process faster and easier, increasing the number of first-party disputes.
How First-Party Misuse Drains Revenue
First-party misuse hits merchants in multiple ways:
- Lost revenue: Merchants refund the purchase amount and lose access to goods or services already delivered.
- Chargeback fees: Each dispute usually comes with a processing fee, which can add up quickly.
- Operational burden: Staff must gather documentation, respond to disputes, and track chargeback outcomes.
- Long-term impact: High dispute ratios can lead to increased scrutiny from payment processors, higher reserve requirements, or even account termination in extreme cases.
For example, a merchant selling a $50 subscription service might see just a handful of disputes per month. But with fees, lost revenue, and staff time, the real cost can easily exceed $200 per dispute. Multiply that across dozens of transactions, and the financial impact becomes significant.
Mastercard’s Response to First-Party Fraud
Mastercard has recognized that first-party misuse is no longer a minor issue. Their expanded first-party fraud initiatives aim to:
- Clarify accountability for cardholders who misuse disputes.
- Improve detection and reporting mechanisms for friendly fraud.
- Help merchants and banks respond to disputes more effectively.
Take note that networks now treat friendly fraud as a structural risk rather than a rare occurrence. This shift signals that merchants need to proactively manage disputes instead of assuming the network will absorb the problem.
Why Merchants Still Carry the Burden
Even with network-level initiatives, merchants remain on the front line. Banks often prioritize the cardholder experience, which means merchants must still manage dispute ratios and respond promptly to chargebacks. Ignoring friendly fraud allows losses to compound silently, affecting both revenue and operational efficiency.
Practical Steps to Reduce First-Party Misuse
Merchants can take action to limit friendly fraud before it hits the chargeback stage:
- Clear statement descriptors: Make sure transaction descriptions are recognizable to customers.
- Post-purchase communication: Send confirmation emails, receipts, and subscription reminders to reduce confusion.
- Accessible customer support: Provide easy ways for customers to resolve issues without filing a dispute.
- Dispute alerts and monitoring tools: Real-time systems, like Chargeblast, help merchants intercept disputes before they escalate.
Implementing these measures doesn’t eliminate first-party misuse entirely, but it can reduce revenue loss and improve chargeback ratios.
Why First-Party Misuse Demands Attention in 2026
Friendly fraud isn’t a niche problem anymore—it’s the leading type of chargeback worldwide. Mastercard’s data and Chargeblast’s insights both show that merchants who ignore first-party misuse absorb a silent but significant cost. Addressing it proactively protects revenue, improves operational efficiency, and strengthens relationships with payment processors.
FAQ: First-Party Misuse
What is first-party misuse in chargebacks?
It’s when a legitimate cardholder disputes a transaction they actually made, often due to confusion, regret, or intentional abuse.
Is friendly fraud considered real fraud?
Yes. While the cardholder initiates the dispute, networks and merchants classify it as fraud because it results in financial loss and abuse of the chargeback system.
Why is first-party misuse increasing?
Easier dispute tools, unclear billing descriptors, subscription fatigue, and consumer behavior all contribute to rising friendly fraud rates.
How does friendly fraud impact merchant revenue?
It causes lost sales, added chargeback fees, staff time spent managing disputes, and long-term financial consequences from higher risk profiles.
What is Mastercard doing about first-party fraud?
Mastercard has expanded initiatives to hold cardholders accountable, improve detection, and support merchants in managing disputes more effectively.
How can merchants reduce first-party misuse disputes?
Clear billing, better post-purchase communication, accessible support, and real-time dispute alerts are all effective strategies.
Stop First-Party Misuse from Draining Your Revenue
Friendly fraud doesn’t have to take a bite out of your business. Chargeblast provides real-time dispute alerts, automated evidence collection, and actionable insights to help merchants reduce chargebacks before they escalate. Protect your profits, save time, and stay ahead of first-party misuse.
Book a demo below to see how Chargeblast can help you tackle disputes and safeguard your revenue.
