Greg Witten
First-party misuse, also known as friendly fraud, has proved to be a persistent challenge for merchants. Friendly fraud occurs when customers dispute a legitimate transaction because they cannot remember authorizing it or intentional abuse of the dispute process. Regardless of the reason, merchants end up facing financial losses and reputational risk. So what can you do to manage the risk of friendly fraud? Let’s look at five steps that can help.
1. Invest in data and technology for better protection
A strong defense against first-party misuse begins with robust data management and modern payment infrastructure. Storing your transaction data, such as purchase history, delivery confirmation, and account activity in a centralized location makes it easier to quickly retrieve evidence in the event of a dispute. This is especially important with Visa’s Compelling Evidence 3.0 (CE3.0) rule, which helps merchants automatically reverse some chargebacks by showing a customer’s history of legitimate purchases. Ensure your systems allow you to rapidly access and submit records, including prior transactions from the same customer within 120 to 365 days.
2. Prioritize transparent communication
Nearly half of merchants report that confusion about a transaction drives first-party misuse.1 You can solve this with clear and transparent communication at every step. Use easily recognizable payment descriptors with your business name and contact details, and make sure terms and conditions, such as trial lengths, billing cycles, and cancellation policies, are plainly stated at the time of purchase. For subscriptions, clearly note any trial periods or renewals directly on customers’ billing statements and send them reminders before they are charged. These steps can help customers recognize transactions, reducing accidental disputes.
3. Leverage third-party expertise
Managing disputes in-house may seem like an effective solution, but research shows that third-party services help merchants retain more revenue by automating dispute responses and integrating with centralized data systems.1 Today’s AI-driven dispute tools can also detect patterns and streamline responses, reducing the burden on your staff.
4. Tailor your subscription strategy
Subscription and recurring billing businesses face higher risk from friendly fraud, because customers often overlook subscription terms, renewals, or trial expirations and then dispute the charges. To combat this risk, send reminders before renewals, make cancellations easy, and provide clear receipts and terms. These practices not only prevent disputes but also help you foster trust with your customers.
5. Adapt for the future
As friendly fraud evolves, it’s important to adapt your strategy. Centralized data, transparent communication, and the latest dispute management tools are key to reducing first-party misuse. While friendly fraud cannot be eliminated entirely, if you’re equipped with the right tools and strategies, you’ll be well positioned to protect your revenue and reputation.
For more expert insights about how to fight friendly fraud, check out our 2025 Global eCommerce Payments & Fraud Report.
1. MRC Payments and Fraud Report