Protecting your revenue is about more than just making sales – it’s about keeping them.

For many businesses, chargebacks and first-party misuse (often called ‘friendly fraud’) have become significant hurdles that can quietly erode profit margins.

“While some disputes are legitimate, many arise from confusion. In addition, fraudulent behaviour from bad actors continue to rise,” says Colin Baines, VP of commercial and country manager at Worldpay. “Understanding these nuances, and working with right partner is the first step to safeguarding your bottom line and delivering a smoother experience for your customers” 

Dispute rates by the numbers

The scale of the challenge for modern merchants is reflected in recent industry and internal data:

• US$33.8 billion: The projected value of global chargebacks in 2025 (Mastercard State of Chargebacks Report 2025).
• 50 per cent: The average share of representments won by merchants, highlighting that half of all defended disputes still result in a loss for the business (Mastercard)

The true cost of the ‘friendly’ dispute

A chargeback occurs when a customer contacts their card issuer to reverse a payment rather than speaking to the merchant. While designed as a safety net, this process is increasingly used as a tool of convenience.

To manage your risk, it’s helpful to categorise disputes into three areas:

1. True fraud: A criminal uses stolen details to make an unauthorised purchase.
2. Merchant error: A mistake in fulfillment, such as shipping the wrong item or a confusing billing descriptor that a customer doesn’t recognise on their statement.
3. First-party misuse (friendly fraud): This happens when a customer makes a legitimate purchase but later disputes it with their bank. This might be due to ‘buyer’s remorse,’ a family member making a purchase without their permission or simply forgetting the transaction occurred.

Why proactive management matters

For merchants, a chargeback is more than just a lost sale. Each dispute carries an administrative fee, and high chargeback ratios can lead to increased scrutiny from card networks or higher processing costs. For many businesses, the time spent gathering ‘compelling evidence’ to fight a false claim is a major drain on daily operations.

Practical steps to protect your business

You can take proactive steps today to minimise the impact of disputes:

1. Audit your billing descriptors: Ensure the name on a customer’s bank statement matches your brand name. If a customer shopped at ‘The Corner Cafe’ but sees a charge from ‘TC Holdings LLC,’ they might flag it as fraud.
2. Make ‘Contact us’ easier than ‘Dispute’: Ensure your refund and return policies are written in plain English and easy to find. If a customer knows they can get a quick resolution from you, they are less likely to call their bank.
3. Prioritise shipping transparency: Send automated tracking numbers and delivery confirmations. This doesn’t just improve the customer experience; it provides ‘compelling evidence’ if a delivery is ever questioned.
4. Layer your authentication: Use tools like Address Verification Service (AVS), Card Verification Value (CVV) and 3D Secure 2 (3DS2). These provide proof that the actual cardholder is the one making the purchase.
5. Keep digital ‘breadbox’ records: Save transaction receipts, IP addresses and customer service logs. If you need to represent a case to a bank, this documentation is your best defence.
6. Automate your defence: Managing disputes manually is difficult as you scale. Modern tools can help you identify potential issues before they become formal chargebacks.
7. Leverage data-driven insights: Use reporting to find patterns. Are certain products or locations seeing higher dispute rates? Understanding the ‘why’ allows you to fix the root cause.

“Don’t wait for disputes to happen. Focus on clear communication and a payments provider that offers robust data – so your teams and resources are spending less time chasing lost funds and more time focus on your core business and optimising for greater conversions.”