UK consumers claim GBP £3.5bn in friendly fraud refunds

UK consumers received GBP 3.5 billion in refunds due to friendly fraud over the past 12 months, according to emerchantpay. The company estimated that 6.5 million people received money back after making illegitimate claims.

The findings were based on research conducted by Opinium among 2,000 UK adults and weighted to be nationally representative.

Friendly fraud, also known as first-party fraud, occurs when a customer disputes a genuine transaction they previously authorised. The claim is typically presented as if the payment was made by a criminal third party, even though the transaction was legitimate.

During the period covered by the survey, 7.9 million UK consumers disputed a transaction as part of friendly fraud, the research found. Of those, 6.5 million received compensation from their bank, while only 18% of people who made an illegitimate claim were denied compensation.

The average refund value per claimant was GBP £441, according to the research, which also found that 18% of successful claimants received more than GBP £500.

Repeat claims

The study suggested that some consumers use the practice repeatedly. Two in five (38%) of those who reported a legitimate transaction as unauthorised admitted doing so more than twice.

The report also cited wider evidence on public attitudes. Cifas data referenced in the research showed that 48% of UK adults believe it is reasonable to commit friendly fraud, with younger shoppers identified as the group most likely to make fraudulent claims.

Although banks usually reimburse customers at the start of a dispute, the eventual cost often falls on merchants. Banks can pass losses back to retailers through chargebacks and dispute fees, leaving businesses to absorb the cost unless they can prove a transaction was genuine and fulfilled correctly.

That matters because chargebacks are designed as a consumer protection measure, allowing cardholders to challenge orders that go wrong or payments they did not authorise. But when the underlying transaction is valid, the same process can become a route for false claims that are difficult for merchants to contest.

Industry forecasts suggest the problem may grow. Mastercard has predicted that global chargeback volume will rise by 24% to 324 million transactions in 2028, with 45% of that volume classified as fraudulent.

"Friendly fraud is not a victimless crime - banks and businesses are increasingly feeling the impact as cases continue to rise. It remains a complex issue to manage, with genuine mistakes often difficult to distinguish from deliberately fraudulent claims.," Alexander Berrai, Deputy CEO of emerchantpay, said.

"There are, however, practical steps merchants can take to mitigate this risk. To effectively challenge the growing volumes of disputes, businesses must equip themselves with compelling evidence including detailed transaction information, proof of authentication, and records of customer communication.

Partnering with a PSP can help to provide merchants with that depth of insight needed to do this effectively. emerchantpay supports businesses throughout the dispute lifecycle - from managing incoming cases to identifying recurring triggers behind disputed transactions," Berrai added.

Merchant response

Some cases stem from confusion rather than deliberate abuse. Customers may not recognise a retailer's name on a statement, may forget a purchase, or may question a bill that appears unclear.

According to the report, merchants can reduce these mistaken claims by improving billing descriptors and keeping fuller records of customer interactions. It also pointed to two-factor authentication as a way for businesses to demonstrate that a customer approved a transaction.

Another area highlighted was the use of fully 3D Secure-authenticated payments. These transactions are usually protected from fraud-related chargeback reason codes, which can limit the grounds available for a false claim and make some disputes easier to fight when supported by documentation.

The figures underscore the scale of the issue for retailers already operating on thin margins and facing rising operating costs. With the average disputed refund at GBP £441 and millions of claims passing through the banking system, the losses associated with friendly fraud are no longer confined to isolated cases.