Friendly Fraud & The Chargeback Challenge: How to Overcome It

This isn’t just about disputes anymore. It’s about whether your business can keep processing payments at all.

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Friendly Fraud Is Quietly Killing Your Revenue — and Now Visa’s VAMP Program Is Watching

Friendly fraud happens when legitimate customers dispute real transactions — and it’s growing faster than any other type of ecommerce fraud. What used to be a frustrating cost of doing business is now a potential compliance disaster.

With VAMP tracking both fraud alerts (TC40s) and chargebacks (TC15s) under one strict ratio, even small spikes in disputes can push your account into the danger zone, which can trigger fines, frozen funds, or even loss of your merchant ID (MID).

But here’s the good news: with the right recovery tools, you can detect the warning signs early, stop friendly fraud before it escalates, and protect your MID health automatically.

This blog breaks down what chargebacks are, how to recognize the risks, keep your VAMP ratio under control, and turn chargeback chaos into predictable revenue growth.

👉 Calculate Your VAMP Risk — Free Interactive Tool

Instantly check your fraud-and-dispute ratio and see if you’re approaching Visa’s new 2.2% threshold. Don’t wait until “friendly” fraud becomes a very expensive problem.

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What Is a Chargeback — and How Does Friendly Fraud Fit In?

Chargebacks occur when buyers dispute charges to their credit cards, compelling the bank to force a refund. Sometimes a chargeback is an honest mistake — often called friendly fraud or first-party fraud — when customers file a dispute because they forgot about their purchase or don’t recognize the charge on their statement.

Other times, fraudsters intentionally order a product, then file a chargeback to get the product for free, illustrating the consequences of friendly fraud. Sometimes they even resell it. These malicious chargebacks are a “double whammy” where the merchant loses both the product and incurs extra fees ranging from $15 to $115.

If companies exceed a defined chargeback threshold, they could be entered into an Excessive Chargeback Program or now, under VAMP, face direct financial penalties and processing restrictions related to chargeback fraud.

Visa calculates this ratio by combining fraud alerts (TC40) and non-fraud disputes (TC15) and dividing by your total card-not-present transactions.

If that number exceeds 2.2%, you’re at risk of being flagged. And that threshold will drop to 1.5% globally by 2026.

Even a handful of recurring disputes can now trigger monitoring, fines, or in worst cases, termination of your merchant account.

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Chargebacks: A Ubiquitous Problem for Ecommerce Merchants

A 2020 study we published with our anti-fraud partner Kount, an Equifax company, revealed chargebacks topped the list of fraud types threatening online retail merchants around the world. The poll results were also consistent with the type of fraud we see from our merchants.  

Since then, the threat has only intensified.

According to experts, in the current day, businesses collectively lose over $100 billion annually to friendly fraud and disputes, and subscription businesses are hit the hardest. Forgotten trial sign-ups, unclear billing descriptors, or “unauthorized recurring charges” are some of the most common triggers for initiating a chargeback.

For businesses with recurring payments or high transaction volume, VAMP’s unified fraud-and-dispute monitoring raises the stakes: a single month of elevated chargebacks can now jeopardize your entire MID portfolio.

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Chargeback Red Flags

Friendly fraud rarely looks suspicious — until it does. Merchants should monitor for red flags that signal potential dispute activity, especially since every incident now counts toward your VAMP ratio:

Abnormally high average order values — If an average order value is 10 or 20 times higher than normal, fraudsters could be trying to score your merchandise in bulk.

• Risky IP addresses — Certain IP addresses have a higher likelihood of being connected with fraud based on location or if users deploy IP masking.
• Conflicting credit card and shipping addresses — An item being shipped to an address different from the credit card’s billing address could indicate a chargeback in the future.
• New email accounts — Sometimes fraudsters will create entirely new emails to complete a fraudulent transaction or abuse your current referral program. More than 35% of subscribers admit to using a second email to receive referral benefits, according to our September 2022 Subscription Commerce Conversion Index.

Not every refund is fraud — but every pattern tells a story. Merchants who act early keep their ratios and their MIDs healthy, effectively fighting friendly fraud.

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Can You Prevent Friendly Fraud? (Yes — Here’s How)

The Three-Step Defense Plan Against Friendly Fraud

Step 1: Detect — Spot Risk Early

Use chargeback alerts (Verifi/Ethoca) and transaction monitoring to identify disputes before they escalate. Merchants who act within 24 hours can reverse 30–40% of chargebacks before they’re filed, significantly aiding chargeback prevention efforts.

Step 2: Deflect — Stop Disputes Before They Count

AI-driven tools like Sticky.io Recovery prevent failed payments from becoming chargebacks.

By retrying and rerouting declined payments intelligently, you not only recover lost revenue — you also prevent failed authorizations from triggering friendly fraud claims later. 

Every failed payment is a potential future dispute. Sticky.io Recovery’s retry logic stops those losses before they count toward your VAMP ratio.

Step 3: Defend — Protect Your Merchant Health

Leverage 3D Secure, fraud scoring, and velocity limits to prevent abuse and reduce the risk of chargeback disputes. Sticky.io’s fraud prevention and recovery tools help merchants reduce chargebacks on first rebills by up to 85%

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Prevent Chargebacks

Staying ahead of disputes requires a mix of prevention, detection, and recovery — all of which directly support VAMP compliance:

Automated alerts: Sometimes online merchants don’t even find out about chargebacks until a significant amount of time has already passed. The best platforms can send an alert in real-time when a chargeback is initiated against online retailers, so they can preemptively reverse it right away.

3D Verify: Adding an additional layer of security at checkout, 3D Verify protects merchants from friendly fraud and reduces chargebacks by shifting the liability back onto the issuing bank. This supports better merchant ID (MID) health and reduces chargebacks on first rebills, when more than 85% of disputes occur.

Preventative security: To ensure all transactions are genuine, an enterprise-grade ecommerce platform should gather and leverage millions of data points using advanced artificial intelligence to fight friendly fraud. Behaviors like cancellations, chargebacks and refunds identify bad actors and the platform stops their sales from processing right at the point of purchase.

Data and dashboards: Leverage order analysis, affiliate monitoring dashboards and fraud statistics to identify chargebacks and opportunities to reduce them. Zoom in to see comprehensive details at the per-customer level or zoom out to get the macro perspective on how chargebacks impact your business. 

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VAMP and the Hidden Cost of Friendly Fraud

Under Visa’s 2025 VAMP framework, both fraud and non-fraud disputes count — and sometimes twice if a fraudulent transaction also becomes a chargeback, complicating the chargeback claim process.

That means:

• A single $50 disputed charge can trigger $10 in fines.
• Repeat offenders or subscription churn can snowball into thousands in lost revenue plus compliance penalties.
• Acquirers may freeze funds or close accounts after six months of sustained violations.

Sticky.io helps prevent those losses by keeping both your revenue and your reputation intact — all while helping you maintain a clean VAMP score.

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Building a Chargeback-Proof Future

Preventing friendly fraud isn’t just good compliance — it’s smart business.

By unifying payment data, fraud alerts, and recovery workflows, Sticky.io gives merchants a single source of truth across CRM, Checkout, and Recovery.

A common question is, ‘How do I know if my VAMP ratio is too high?'

The answer is simple. If your combined fraud + dispute rate nears 1.8%, you’re approaching Visa’s red zone. Use the VAMP Calculator to see your live risk score and how much headroom you have before breaching the 2.2% threshold.

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Stop Losing Revenue You’ve Already Earned.

Failed payments and friendly fraud are silent profit killers — and with VAMP tightening thresholds, there’s no room for error. Sticky.io combines AI-powered retries, smart routing, and built-in fraud protection so your revenue stays where it belongs: with you.

If you’re not sure whether your business is already at risk, start by calculating your VAMP ratio  to instantly see where your fraud and dispute levels stand and how close you are to Visa’s threshold.

Ready to go beyond compliance and actively fight chargebacks? Book a demo of Sticky.io to see how intelligent routing, recovery automation, and chargeback protection can keep your revenue flowing — and your business growing.

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Orginially published in October, 2021. Updated for content and quality in November, 2025.