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First-Party Fraud

Help protect your business from first-party fraud. 

What is first-party fraud and why should you care?

First-party fraud, also known as friendly fraud, occurs when customers dispute legitimate transactions as fraud. It can be especially hard to catch because many merchants and issuers don’t have access to the information they need to distinguish first-party fraud from its more notorious counterpart, third-party—or true—fraud from real fraudsters. But while the sources of fraud are different, the impact on your business is the same. First-party fraud costs merchants upwards of $50 billion a year.  

Person looking at phone with confused expression

First-party fraud hides in plain sight. 

First-party fraud hides in plain sight since the perpetrators are your customers. Here’s a look at the typical causes of first-party fraud and what you can do about it.



Transaction confusion

Happens when a cardholder mistakes a legitimate charge for a fraudulent one and disputes it. This has grown in recent years as people transact digitally on a growing array of connected devices.

Provide clear transaction details.

Clear purchase information like digital receipts and merchant names and logos help consumers recognize legitimate transactions on their statements


Occurs when a household member other than the cardholder makes a purchase without the cardholder’s knowledge or authorization—for example, a child making a digital purchase on a smart device.

Provide clear transaction information.

Clear purchase information like digital receipts and merchant names can help consumers recognize transactions on their statements made by their own household members.

Service-related issues

Are a growing source of first-party fraud as customers increasingly bypass merchants to resolve service-related issues, like damaged goods, when they aren’t happy with their purchase.

Share information faster.

Collaborative alert tools can help merchants and issuers quickly share transaction dispute information, allowing merchants to speed up the process of providing evidence of a legitimate purchase.

How can you reduce first-party fraud? 


Ethoca Alerts provides merchants with issuer data that reduces the time it takes to be alerted of customer disputes so they can take steps to address it—often eliminating the need for chargebacks altogether. In the case of first-party fraud, it allows the merchant to stop disputes that arise as a result. 

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Ethoca Consumer Clarity™ helps reduce the transaction confusion that leads to first-party fraud by providing customers access to recognisable purchase details—such as the merchant’s name and logo—through cardholder statements and issuers’ call centers—so you’re empowered to stop disputes before they happen. 

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As all types of fraud continue to grow in our increasingly digital economy, businesses are looking for partners with the right solutions. Collaborative solutions make it easier for issuers and merchants to quickly identify and share information, reducing confusion and first-party chargebacks and also the risk of lost sales and revenue. 

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Check out our research report: The First-Party Fraud Conundrum

Transaction confusion, friendly fraud, first party misuse, false chargeback claims—these are just some of the terms used to describe legitimate transactions becoming chargebacks, better known as first party fraud. Read our newest report to learn how the first-party fraud landscape is shifting. 

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How Ethoca can help

Your defence against first-party fraud. 

Powered by the ever-growing Ethoca Network, our solutions provide rich intelligence throughout the purchase journey to close costly communication gaps in the payments ecosystem. For the first time, fraud, customer dispute and purchase insights are available and actionable in real time. That means fewer chargebacks, less purchase confusion and better customer experiences.

Ethoca Consumer Clarity™

Provides recognisable purchase information to issuers and to cardholders through their bank app. The ability to easily recognise purchases means fewer disputes caused by transaction confusion, improving the overall customer experience and reducing first party fraud and chargeback costs.

Ethoca Alerts

Connects issuers, acquirers and merchants to share fraud and dispute data, speeding up the dispute resolution process. By receiving real-time fraud alerts, merchants can quickly identify fraud, stop order fulfillment, issue refunds, and prevent the need for chargebacks.

Need more information?

We’ve answered some of the most common questions about first-party fraud.

Is first-party fraud really that common?

While first-party fraud can be hard to identify, it’s a growing issue for businesses of all shapes and sizes. In fact, first-party fraud accounts for upwards of 80% of all fraud for digital goods merchants.  One of the primary reasons for this growth is transaction confusion driven by the proliferation of connected devices and related CNP transactions. In fact, 77% of consumers say they often find unrecognisable transactions in their online statements, according to Aite-Novarica.

How much does first-party fraud cost?

First-party fraud—sometimes referred to as friendly fraud—is damaging to your bottom line. False customer disputes known as first-party or friendly fraud account for as much as 70% of all credit card fraud, costing the industry over £100 billion (US$132 billion) a year, not including the additional losses that merchants must absorb.  And according to Mercator, it costs merchants alone upwards of $50B a year. 

Does first-party fraud cause chargebacks?

Because merchants and issuers often lack the information they need to differentiate first-party from third-party fraud, many customer disputes originating as first-party fraud proceed to costly chargebacks. The harmful effects of these chargebacks are most evident to merchants and issuers, which face direct costs when a cardholder disputes a transaction. These chargebacks—whether due to transaction confusion or misuse of the dispute process—affect both card-present (CP) and card-not-present (CNP) transactions, but e-commerce merchants bear more of the financial liability for this form of fraud since it occurs more frequently with the growing volume of online buying and related CNP transactions.  

How can I prevent first-party fraud? 

Whether a chargeback is the result of first-party or third-party fraud, the results are the same for merchants—loss of the sale and the goods, on top of costly chargeback fees. The best way to deal with first-party fraud is to have a solid chargeback-prevention strategy in place that includes:

  • A clear merchant descriptor on the cardholder's statement to help them identify the transaction.
  • Digital receipts with additional purchase details to further reduce transaction confusion.
  • Real-time collaborative alerts between merchants and issuers of incoming disputes to identify and resolve first-party fraud before it gets to the chargeback stage.

Is first-party fraud easy to detect? 

Distinguishing between first-party and third-party fraud is complicated and issuers often take different approaches. When customers initiate disputes, some issuers try to determine whether the cause is transaction confusion, first-party fraud, or third-party fraud, while others automatically initiate a chargeback. Common reasons for automatically initiating disputes include not having the infrastructure to uniquely identify the type of dispute, lack of resources, or concerns about government audits. Other issuers work with the cardholder to investigate the dispute to determine if it is transaction confusion by:

  • Examining the consumer’s transaction history to see if they have prior transaction history with the merchant. 
  • Identifying other names under which the merchant operates. 
  • Subscribing to industry services in which the merchant provides additional transaction details, such as a list of the items purchased, and shares this information with the consumer.