I was stunned when I first saw the research showing that 23% of consumers admit to engaging in friendly fraud. Another study found that 1 in 4 customers openly acknowledge this behavior. But why would so many otherwise honest people do this?
The answer lies in how consumers view the chargeback process. Many don’t see filing a chargeback as fraud—they see it as a convenient customer service tool. They don’t understand that:
- Chargebacks are meant for fraudulent transactions, not customer service issues
- Filing a false chargeback is actually a form of fraud
- These disputes hurt merchants far more than standard returns
There’s also a significant knowledge gap. Many consumers simply don’t understand the difference between requesting a refund from a merchant and filing a chargeback with their bank. They view chargebacks as an easier alternative to contacting customer service.
The Real Cost of Cardholder Disputes
When a customer files a friendly fraud chargebacks, the costs go far beyond the lost product and revenue. For every $1 disputed, merchants actually lose $3.60 on average when you factor in:
- Chargeback fees (typically $20-$100 per dispute)
- Lost merchandise
- Shipping costs
- Processing costs
- Employee time spent fighting the dispute
But the long-term costs can be even more damaging:
- Higher processing rates from your payment processor
- Potential loss of merchant accounts if chargeback rates get too high
- Damaged business reputation
- Time and resources diverted from growing your business