How Ethoca helps prevent first-party fraud and reduce chargebacks

First-party fraud, sometimes referred to as friendly fraud, occurs when a cardholder disputes a transaction that was legitimate. While some cases involve intentional misuse, many stem from transaction confusion, household purchases, forgotten subscriptions or customer service issues that lead consumers to contact their issuer instead of the merchant.

The impact is significant. Merchants and issuers estimate that approximately 20% of disputes are linked to first-party fraud, making it one of the largest contributors to preventable chargebacks today.

Chargeback pressure is also expected to keep rising: Mastercard’s 2026 research report estimates annual chargeback volume will reach 334 million by 2028, with an average merchant chargeback value of $94.

As digital commerce continues to expand, merchants and issuers need better ways to identify first-party fraud, reduce unnecessary disputes and prevent avoidable chargebacks before they occur.

Many businesses assume first-party fraud is always intentional. Some of the most common causes are rooted in confusion rather than malicious behavior. 

Transaction confusion occurs when a cardholder does not recognize a legitimate purchase and mistakenly reports it as fraud.

Consumers increasingly shop across multiple merchants, marketplaces, subscriptions, digital services and devices. As a result, the merchant descriptor appearing on a statement may not match what the cardholder expects to see.

Research from Mastercard and Datos Insights found that 48% of consumers have disputed a charge they later realized was legitimate, demonstrating how frequently transaction confusion contributes to disputes.

Another common source of first-party fraud occurs when a family member makes a purchase using a shared account or stored payment credential without the cardholder’s knowledge.

These situations are increasingly common across subscription services, gaming platforms, app stores and digital commerce environments.

Customers may also turn directly to their financial institution when they are dissatisfied with a purchase, experience shipping delays, want a refund or believe a merchant issue has not been resolved quickly enough.

Rather than contacting the merchant first, many consumers enter the dispute process immediately, creating avoidable chargebacks that increase costs for everyone involved.

More than four in five issuers say increasing customer awareness of the dispute process is driving rising chargeback volumes, and over three-quarters of merchants believe disputing transactions has become too easy.

Unlike third-party fraud, first-party fraud often originates from a legitimate cardholder relationship.

To an issuer, the initial dispute may appear identical to genuine fraud. To a merchant, the transaction may look completely valid because the purchase was authorized and fulfilled successfully.

This lack of shared information makes it difficult to distinguish true fraud from transaction confusion or customer dissatisfaction. As a result, disputes frequently progress through the traditional chargeback process even when the transaction was legitimate. 

Reducing first-party fraud requires greater transparency, earlier visibility into disputes and improved collaboration between merchants and issuers.

Ethoca helps address the root causes of first-party fraud through solutions that improve transaction transparency and facilitate faster information sharing across the payments ecosystem.

One of the most effective ways to reduce first-party fraud is to prevent transaction confusion before a dispute occurs. 

Ethoca Consumer Clarity™ helps provide cardholders with recognizable purchase details, including merchant names, logos and transaction information, through issuer digital banking experiences and customer service channels.

When consumers can quickly identify a transaction, they are less likely to mistakenly report it as fraud. 

Benefits include: 

• Reduced transaction confusion
• Fewer unnecessary disputes
• Lower chargeback volumes
• Improved customer experiences
• Increased trust in digital banking interactions

Want to learn more about Ethoca Consumer Clarity™? Learn more about Ethoca Consumer Clarity™ here.

When a customer contacts their issuer about a transaction, timing is critical. Ethoca Alerts enables near real-time sharing of fraud and dispute information between issuers, acquirers and merchants. This gives merchants the opportunity to review the transaction and take action before a chargeback occurs.

By receiving disputes earlier in the process, merchants can: 

• Resolve customer concerns faster
• Issue refunds when appropriate
• Stop fulfillment of fraudulent orders
• Avoid unnecessary chargebacks 
• Reduce dispute management costs

Mastercard reports that Ethoca Alerts helped prevent more than 39 million chargebacks in 2025, with more than 110 million chargebacks prevented since 2011. Mastercard also reports $1 billion in fraud prevented during 2025 through Ethoca Alerts.

Want to learn more about Ethoca Alerts? Learn more about Ethoca Alerts here.

First-party fraud is harder to solve when merchants and issuers only see part of the picture.

Issuers have visibility into cardholder inquiries and reported fraud, while merchants have access to purchase details, fulfillment information and customer service interactions. When these insights remain disconnected, unnecessary disputes and chargebacks become more likely.

Ethoca helps bridge these information gaps through a collaborative network that enables faster communication and greater transparency. By helping merchants and issuers share relevant transaction information earlier in the dispute lifecycle, Ethoca solutions make it easier to identify first-party fraud, reduce transaction confusion and improve outcomes for customers.