How reporting tools can reduce friendly fraud while meeting TRA exemptions

Friday 15 December 2023 13:37 CET | Editor: Irina Ionescu | Interview

Monica Eaton, Founder of Chargebacks911 and Fi911, talks about the role played by reporting tools in reducing friendly fraud, while meeting Transaction Risk Analysis (TRA) exemptions.

What is the status of friendly fraud in the US, and how exposed are merchants to it, as opposed to other types of fraud?

Friendly fraud is a persistent problem, both in the US and abroad. In 2022, Visa reported that first-party misuse of the chargeback process could account for up to three-quarters of all disputes filed by cardholders. The financial impact is huge, with friendly fraud alone costing businesses an estimated USD 88 billion per year when accounting for factors like forfeited cost of merchandise, wasted marketing dollars, and other overhead costs.

The good news is that new industry practices and rule sets spearheaded by Visa and Mastercard are evidence that they are taking note of this persistent and growing problem. However, until consumer behaviour is retrained away from contacting the bank first, before reaching out to merchants, friendly fraud will remain an issue.

What are the most important consequences of friendly fraud merchants must be aware of?

The direct consequences of chargebacks include lost sales revenue and merchandise, as buyers rarely ship goods back to merchants following a dispute. Merchants are also hit with a chargeback fee, which can vary anywhere from EUR 15 to USD 100 per dispute. If we look at the indirect consequences, though, the costs can be higher than they seem to be at first glance.

There are longer-term consequences as well, as the number of chargebacks issued against a merchant rises, which negatively impacts their chargeback rate. If they exceed monthly chargeback limits imposed by the card schemes, merchants could face restrictions, higher fees, and costly performance reviews. Then, we need to consider the impact that chargebacks might have on the business in the future, which may be the greatest consequence of all for merchants. 

Friendly fraud undermines the integrity of chargeback data, leading to inaccurate and unreliable fraud insights. As a result, front-end fraud filters rely on skewed data, causing good customers to be declined, while criminal activity remains unchallenged. The trickle-down effect of false declines on genuine transactions is a problem, expected to cost merchants up EUR 400 billion in 2023 alone.

How can merchants effectively combat friendly fraud using designated reporting tools?

Chargeback management is a three-part process. The first of these steps is to identify chargebacks by their source – merchant error, third-party fraud, and first-party (friendly) fraud. This enables merchants to challenge invalid chargebacks and address the root cause of disputes for proactive prevention in the long run.  

Reporting tools, whether it’s through API, webhooks, or accessing dispute data through a web portal, help standardise, simplify, and automate otherwise very complicated processes that require additional FTE resources coupled with tight deadlines and potential liabilities. Accurately identifying chargeback sources requires careful analysis of underlying dispute data. 

Merchants need to examine customer claims and the reasons codes attached to chargebacks, as well as available transaction data. Automation of the aggregated dispute data and elements required to analyse and decision prior to chargeback due dates is necessary to obtain ideal results. Dispute data reporting and analysis is necessary if merchants want to get useful insights.

How is Chargebacks911 assisting merchants into achieving their goals?

Chargebacks911 is on the forefront of providing innovative, next-generation solutions that help solve the dispute problem end-to-end, delivering scale and scope through automation. We use Intelligent Source Detection, which is a patented combination of artificial intelligence (AI) and machine learning (ML), which helps identify chargebacks by their true source. This innovative fraud source detection helps enhance the effectiveness of single-layer fraud prevention tools. As the payments industry evolves, access to data continues to be a driving necessity. That’s why Chargebacks911 also supports more integrations and connections spanning across 87 countries, supporting every currency and payment method, whether a major, minor, or APM scheme. 

Our mission is to help revolutionise the chargeback and dispute process through our platform technology, offering lightweight, SaaS solutions to financial institutions and merchants worldwide. Merchants need to have access to data, investigate each chargeback case to find the root cause of the dispute, and take the necessary action based on derived insights, whether it be to challenge the chargeback or make appropriate business optimisations to fix the issue. 

By providing the exchange mechanisms necessary to gather, analyse, and share data as it’s needed, we are making sure that merchants and issuing banks have the most refined picture of transaction disputes, friendly fraud, and the root causes of both. In simple terms, merchants can offload day-to-day oversight of the chargeback process, spend less time worried about retaining revenue, and refocus their attention on growing their business.


This editorial is part of The Paypers' Fraud Prevention in Ecommerce Report 2023-2024, the ultimate source of knowledge that delves into the world of fraud prevention, revealing the most effective security methods for companies to stay one step away from bad actors and secure their businesses. 

About Monica Eaton

As an acclaimed entrepreneur, speaker, and author, Monica Eaton is widely recognised as a thought leader in the fintech industry and a champion of women in technology. Today, her innovations are used by thousands of companies worldwide, cementing her reputation as one of the payment industry’s foremost experts in risk management, chargeback mitigation, and fraud prevention. For further details, visit

About Chargebacks911

Chargebacks911 drives profitability for online merchants by decreasing payment disputes and recovering revenue lost to chargeback fraud. Through a proprietary suite of software and service offerings, the company delivers transparent, end-to-end chargeback management solutions backed by the industry’s only performance-based ROI guarantee.

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Keywords: fraud detection, online fraud, fraud prevention, friendly fraud, chargebacks, first-party misuse, fintech, ecommerce, fraud management, machine learning, artificial intelligence, online payments, payments , API
Categories: Fraud & Financial Crime
Companies: Chargebacks911, Fi911
Countries: World
This article is part of category

Fraud & Financial Crime




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