New research from emerchantpay, a global payment service provider, estimates that UK consumers received approximately GBP 3.5 billion in refunds through friendly fraud over the past 12 months.
The research found that 7.9 million UK consumers disputed a transaction as part of friendly fraud in the period, with 6.5 million receiving compensation from their bank. The average refund value per claimant was GBP 441, with 18% of claimants receiving more than GBP 500. Only 18% of those who made an illegitimate claim were denied compensation.
Friendly fraud, also known as first-party fraud, occurs when a customer disputes a legitimate transaction they previously authorised, often claiming it was carried out by a third party without their consent. It can result from genuine misunderstandings, such as unrecognised billing descriptors, but is increasingly carried out intentionally.
Repeat behaviour and merchant impact
The research reveals patterns of repeat behaviour: two in five individuals who reported a legitimate transaction as unauthorised admitted doing so more than twice. Separately, Cifas data indicates that 48% of UK adults believe it is reasonable to commit friendly fraud, with younger consumers the most likely to make such claims.
The financial impact extends beyond the initial refund. Banks typically reimburse customers at the outset of a dispute before passing the cost back to the merchant through chargebacks and dispute fees. Merchants are then responsible for those costs unless they can provide sufficient evidence that a transaction was legitimate. Mastercard projects global chargeback volumes will increase by 24% to reach 324 million transactions by 2028, with 45% classified as fraudulent.
Emerchantpay identifies practical mitigations, including two-factor authentication, accurate billing descriptors, 3D Secure-authenticated payments, and Compelling Evidence 3.0 documentation as tools that strengthen merchants' ability to contest claims.
Commenting on the findings, Alexander Berrai, Deputy CEO at emerchantpay, said friendly fraud is not a victimless crime and that businesses must equip themselves with compelling evidence, including transaction details, proof of authentication, and customer communication records, to effectively challenge growing dispute volumes.
