The Green Sheet Online Edition
May 5, 2025 • 25:05:01
The changing chargeback landscape
A new report from Mastercard and Datos Research predicts that global chargeback volume will chart double digit growth between now and 2028, when they are expected to reach 324 million transactions. The value of global chargebacks is expected to grow from $33.79 billion in 2025 to $41.69 in 2028. Other reports portray an even bleaker outlook.
Forecasted growth varies by region, the Datos research revealed. But the lion's share – $20.47 billion – is forecast to occur in North America.
Meanwhile, in April 2025, Visa’s updated Visa Acquirer Monitoring Program (VAMP) took effect. Designed to simplify monitoring while offering a more comprehensive view of fraud and chargeback activities, VAMP replaced the Visa Dispute Monitoring Program and the Visa Fraud Monitoring Program. Notably, fraud-related disputes resolved through Rapid Dispute Resolution or the Cardholder Dispute Resolution Network are now included in VAMP ratio calculations.
According to a Chargeback Gurus briefing paper, the changes have required acquirers to update how they track and calculate merchant ratios. VAMP establishes two sets of ratio thresholds—one for acquirers and one for merchants. Both groups face penalties for exceeding these thresholds. Currently, the initial threshold for merchants is 1.5 percent, dropping to 0.9 percent in January 2026. For acquirers, fines for "above standard" fraud and chargebacks begin at 0.3 percent in January, rising to 0.5 percent for those in the "excessive" category. Enforcement fees may also apply: acquirers could be charged $5 per transaction when classified as "above standard" and $10 per transaction when deemed "excessive." Merchants classified as "excessive" may face $10-per-transaction fees.
By the numbers
Datos conducted research for Mastercard in the fourth quarter of 2024. It used a combination of qualitative and quantitative interviews with executives at 23 financial institutions across four countries: the United States., UK, Brazil and Australia. Datos also conducted quantitative interviews with executives across an equal number of merchants in those countries. The merchants were classified as midsized or large.
Across the countries, 25 percent of merchants reported annual chargeback volume in excess of 1 million transactions, Mastercard reported in The chargeback window of opportunity: A global view of the 2025 chargeback trends and how to turn them into opportunities. For 13 percent of merchants, chargeback volume is on average 2 percent of their total sales or higher.
Merchants across the four countries have an average chargeback amount of $94; in the United States, it's $110. Of the different categories of merchants represented in the study, those in the travel and hospitality sectors experienced the highest average chargeback value at $110, according to Datos.
The most common types of chargebacks (38 percent) are legitimate; 25 percent are third-party fraud; 21 percent are first-party (or friendly) fraud; the remaining 16 percent are too low in value to pursue, according to the Datos research.
Edgar Dunn & Co., which conducts research for Chargebacks911, considers friendly fraud a bigger problem than the Datos research suggests; it found a majority of merchants had seen overall increases in first-party fraud over the preceding three years. Datos points a finger of blame for increasing chargebacks at the growing adoption by consumers of digital banking and payments, as well as online shopping.
Better than six in 10 (63 percent) of digital purchases comprise the majority of merchants' transaction volume. (Thirty-seven percent of consumers make purchases online and 26 do so using mobile apps.) Financial institutions in the United States are seeing increases in dispute volumes on the order of 30-40 percent that are tied to digital channels.
Further complicating matters "suboptimal fraud systems are inadequately stopping fraudulent transactions," and that leads to more chargebacks, the Datos report noted.
Yet better than 90 percent of consumers trust their banks to correct fraud issues, according to the 2014 Cardholder Dispute Index, compiled by Chargebacks911. Fifty-six percent of FIs and 59 percent of merchants reported increases in excess of 10 percent over the past year.
And with the increase, Datos researchers found that fraudulent chargebacks are rising – both first-party and third-party fraud.
The popularity of subscription services and free trial offers among consumers and merchants alike contributes to the problem. The global ecommerce subscription market tops $100 million annually, according to Chargebacks911, and that number is expected to grow to $2.4 trillion by 2028.
Yet most consumers don't consider it their responsibility to cancel subscriptions they are disenchanted with: 87.6 percent told the firm's pollsters they want their banks to cancel those subscriptions.
It's a matter of perspective
In yet another report, Chargeflow, a chargeback platform developed specifically for online businesses, blamed customer demands for immediacy and other factors for soaring incidences of unfriendly fraud – a trend that could be costing online merchants $117 billion a year.
The report, The psychology of chargebacks, attributed nearly 80 percent of chargeback cases to friendly fraud. What's more, the company's research suggested most customers are unaware they are engaging in such activity. Asked if they initiated a false chargeback (they knew the merchant was right and they weren't) just 2.9 percent of those surveyed said yes.
Chargeflow surveyed just over 700 consumers and found immediacy is the name of the game. Asked how long they would typically wait to file a chargeback after encountering an issue, 23 percent said they would file immediately. Another 38 percent said they would wait just one to three days, while 23 percent said they would be happy with response time between four and seven days.
Bottom line: customer service teams are getting little to no time to identify and de-escalate problems before disputes are filed. Customer-first dispute policies also lead to chargeback success rates that do little to dissuade customers from acting. Just 12 percent of those surveyed by Chargeflow said they had a chargeback denied.
But bad customer experiences do drive some chargebacks, Chargeflow reported. For example, when asked about the likelihood of initiating a chargeback if they encountered an issue with a purchase, just 11 percent said no. Better than a quarter (27 percent) were highly likely to go the chargeback route, and 25 percent stated they were somewhat likely.
Not easy problem to spot, or stop
Merchants, as well as banks and processors, are well aware that chargebacks are a growing problem that comes with growing costs. And ignoring the problem is not an appropriate response
"Chargeback abuse – both accidental and malicious – is almost impossible for non-professionals to anticipate, because it can happen days or weeks after the original transaction. This makes it a far more dangerous threat than many merchants realize," said Monica Eaton, CEO at Chargbacks911.
Responding to an evolving ecosystem
A rapidly evolving payment ecosystem, increasing complexity of players involved and technological advancements in payment methods have led to increases in fraud, disputes and enumeration attacks, Visa stated. Enumeration attacks are rapid, card testing attacks that lead to about $1.1 billion in fraud losses each year.
Disputes are also a growing concern. Consumers disputed nearly $11 billion worth of charges with U.S. card issuers last year, up from $7.2 billion in 2019. "Visa has a unique ability to help ensure the disputes processed are above board," the company wrote in a blog post.
Visa said it is obligated to protect each party in the payment journey – from acquirers and issuers to merchants and consumers – from fraudulent activity. "VAMP creates more seamless controls and processes for acquirers and merchants to effectively deter fraud and enumeration, and to effectively manage disputes, contributing to a more secure environment," Visa wrote.
"VAMP is a critical advancement for the industry, providing merchants with deeper insights and better control," said Tim Tynan, CEO at Chargeback Gurus. This includes providing merchants with real-time visibility, advanced tracking, and proactive alerts.
The platform also allows merchants to compare chargeback ratios more accurately, monitoring processor VAMP ratios in a unified dashboard. With expert guidance from Chargeback Gurus, merchants can address potential issues before they escalate, ensuring greater compliance and risk reduction, the company said.
"By leveraging VAMP insights, [Chargeback Gurus] empowers merchants with deeper analytics, smarter tracking, and strategic oversight to optimize their chargeback mitigation efforts," said Damo Sampathkumar, the company's chief product officer.
The what and wherefore of fraud and dispute resolution
In discussing the new VAMP, Visa explained that it consolidated multiple existing fraud and dispute monitoring initiatives into a single acquirer program and streamlined 38 distinct remediation processes into one. The program works to:
- Create globally aligned fraud thresholds for both domestic and cross-boarder card-not-present transactions, providing clarity and consistency for acquirers and their merchants.
- Incorporate enumeration criteria based on the number of enumerated authorization transactions and enumeration rate, to foster and promote best practices that guard against attacks from sophisticated fraudsters.
- Evolve from a program designed from outlier management to a lifecycle risk management approach, leading to more comprehensive fraud prevention.
Patti Murphy is senior editor at Green Sheet and president of ProScribes Ink, www.proscribes.net. You can also follow her blog, Today in Payments, at Todayinpayments.com, and her podcast, Merchant Sales Podcast, co-hosted with James Shepherd at www.ccsalespro.com/podcast.
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