Millions given £441 payouts they weren't entitled to as claims increase

UK consumers are estimated to have been given £3.5billion in refunds through 'friendly fraud' over the past 12 months. Over the past year, 7.9 million UK consumers disputed a transaction. Of this number, 6.5 million went on to receive compensation from their bank, with the total refund value amounting to £441 per claimant, and one in five receiving more than £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 that they previously authorised, often claiming that the transaction was carried out by a criminal third party. This can be a result of an innocent misunderstanding, such as not recognising a retailer’s name on a bank statement, but it is increasingly being carried out intentionally. The number of disputes is set to continue growing. Mastercard predicts that the global chargeback volume – 45% of which is classified as fraudulent – will increase by 24% to reach 324 million transactions in 2028. emerchantpay's research reveals patterns of repeat behaviour, with many individuals making false claims on multiple occasions. Two in five who reported a legitimate transaction as unauthorised admit to doing so more than twice. Cifas data shows that half of UK adults believe it is ‘reasonable’ to commit friendly fraud, with younger shoppers the most likely to make fraudulent claims. While banks typically reimburse customers at the outset of a dispute, the financial impact often extends far beyond the initial refund. In most cases, the bank will pass the cost back to the retailer through chargebacks and dispute fees. Merchants are then responsible for these costs unless they can provide compelling evidence that a transaction was legitimate and fulfilled correctly. Alexander Berrai, Deputy CEO at emerchantpay, said: “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. “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.”