- Fraudulent chargebacks are no longer rare, they're a rising epidemic draining billions from merchants
- First-party fraud is booming because banking apps make it easy to lie and win refunds
- Mastercard says businesses face 324 million chargebacks by 2028 if nothing changes fast
Fraudulent chargebacks are fast becoming a major financial and operational burden for global businesses, new research has warned.
A Mastercard-sponsored study by Datos Insights estimates sellers will lose $15 billion to fraudulent chargebacks in 2025.
The total volume of chargebacks is projected to reach $33.79 billion this year and rise to $41.69 billion by 2028. These fraudulent disputes have far-reaching implications that affect everyone from merchants to consumers.
Digital growth comes with new risks
The increase in digital and card-not-present transactions has made online shopping faster and easier, but it has also made it more vulnerable. More purchases made via ecommerce platforms mean more chargeback claims.
Ironically, 45% of chargebacks stem from "first-party" claims, where valid customers fraudulently deny transactions. This is aided by the ease with which malicious actors can contest charges via banking apps, even without solid proof.
Mastercard believes that if nothing is done quickly, there will be 324 million chargebacks by 2028, up from 261 million in 2025. Unfortunately, a system created to protect consumers is now being abused.
Chargebacks are more than just a financial hassle for online companies, particularly those that use even the best ecommerce platform. On average, the chargeback value per dispute for some industries exceeds $120.
Businesses, especially SMEs, cannot handle this cost, and so to save time, many sellers dismiss low-value claims, but these losses mount quickly. They are now forced to decide whether to bear the loss or invest heavily in cybersecurity and dispute resolution procedures. Either way, they will spend more money, which will eventually lead to higher prices or even worse outcomes.
The Mastercard data shows that 46% of SMEs have experienced a cyberattack, with severe outcomes: 18% filed for bankruptcy, and 17% shut down entirely. Cybersecurity is now seen as essential, with 62% of SMEs making it a top budget priority and around 80% calling it critical to daily operations.
The solution? Advanced AI tools. Automated alerts, clear transaction labels, and detailed digital receipts enable smarter dispute handling. Mastercard notes that businesses using these tools now win more than half of their representation cases, where they contest chargebacks with evidence.
Businesses need to collaborate with the best merchant service and payment gateway providers to curb this threat because, without intervention, the costs will inevitably fall on everyday shoppers in the form of higher prices and slower service.
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