Chargebacks were created as a consumer protection tool. You spot an unauthorized charge on your statement, call your bank, and get your money back. Simple enough. But that same system is now being used—intentionally or not—to cheat businesses out of billions.
According to a new Mastercard-backed study from Datos Insights, fraudulent chargebacks will cost businesses $15 billion globally in 2025. That number doesn’t even include legitimate disputes. Just fraud. The total chargeback volume is expected to hit $33.8 billion this year, and climb to nearly $42 billion by 2028.
So what’s driving the surge?
It’s not just hackers or stolen cards. The bigger problem is what’s called first-party misuse, also known as “friendly fraud.” That’s when a cardholder makes a purchase, receives the product or service, and then disputes the charge anyway. Maybe they forgot they made the purchase. Maybe someone in the household did. Or maybe they’re doing it on purpose to get something for free. Either way, the business eats the cost.
First-party fraud now accounts for 45% of all chargebacks.
And the consequences are real.
Small Businesses Take the Hardest Hit
The average chargeback costs more than $120 once you factor in fees, lost revenue, and the time spent fighting the claim. For small and midsize businesses, that adds up fast. Some can’t afford to dispute every case. Some don’t even try. The process is time-consuming and rarely favors the merchant.
The Mastercard report found that nearly 1 in 5 small businesses impacted by chargeback fraud had to file for bankruptcy. Another 17% closed their doors permanently.
Even those that survive pass the cost along to the rest of us. Higher prices, stricter return policies, slower customer service—these are all downstream effects of chargeback abuse.
A System Being Pushed to Its Limits
Fraud aside, chargebacks are still an important consumer protection tool. The challenge is figuring out how to separate real fraud from false claims without gutting that protection. That’s where tech comes in.
Mastercard is pushing for better tools to help merchants. Things like clear statement descriptors, real-time alerts, and AI-driven dispute management. But even with those, there’s only so much a business can do on its own.
The larger fix may require banks, processors, and merchants to share data more freely and flag abuse patterns faster. Until then, many businesses are stuck reacting after the damage is done.
Chargebacks Don’t Have to Break Your Business
If your business is being drained by chargeback fraud, you’re not alone and don’t have to take it lying down. Chargeblast helps merchants prevent, fight, and win chargeback disputes before they spiral out of control.
From pre-dispute alerts to expert case management, we make sure you’re not leaving money on the table or wasting hours on paperwork. You can protect your revenue and keep your business moving forward.
Don’t let chargebacks decide your future.
Let us show you how to stay one step ahead.
