Q4 2025 DIGITAL TRUST INDEX

The Rising Impact of Chargebacks and Consumer Disputes

The State of Disputes in 2025

As digital commerce grows, the frequency and financial impact of disputes and chargebacks is expanding. Global chargeback volume is projected to reach 324 million transactions by 2028, up 24% from 2025, driven largely by the expansion of card-not-present (CNP) payments, which now make up 63% of merchants’ transactions.

The cost burden is growing just as quickly. Worldwide chargeback losses are expected to climb from $33.79 billion in 2025 to $41.69 billion in 2028, while first-party and third-party fraud now account for roughly 45% of merchant dispute volume. With U.S. merchants losing an estimated $4.61 for every $1 in chargebacks, understanding the root causes of disputes—and strengthening prevention strategies—is becoming essential to protecting both revenue and customer trust.

Chargeback Rates Climb Through 2025

Across the Sift Global Data Network, the average chargeback rate fell 23% year-over-year in Q1 2025, from 0.22% to 0.17%. That’s despite Q1 typically being the peak “chargeback season” following holiday shopping. This unexpected decline suggests early-year improvements in dispute prevention, such as stronger fraud controls, clearer customer communication, proactive refunds issued to avoid chargeback disputes, or more effective fulfillment and support workflows that reduced post-holiday disputes.

But the relief was short-lived. Average chargeback rates climbed steadily across the year, reaching 0.26% in Q3 2025, a 53% increase compared to Q1. While rates remain below high-risk merchant thresholds set by processors, the upward trend signals building pressure from growing digital transaction volume, subscription renewals, and emerging first-party fraud behaviors. Without proactive chargeback management, merchants risk higher processing fees, tougher scrutiny from payment partners, and increased operational strain.

Industries Seeing the Highest Chargeback Rates Spikes

Chargeback rates surged most sharply in retail e-commerce (+233%) and transportation (+226%), showing significant operational strain in sectors with large volumes of card-not-present transactions and high customer expectations. B2C SaaS and services (+83%) and B2B SaaS and services (+77%) also saw notable increases likely tied to recurring billing confusion, subscription churn, and first-party fraud. Meanwhile, online travel agencies (+51%), commerce marketplaces (+45%), and ticketing and reservations (+29%) experienced steady growth in disputes, reflecting rising consumer sensitivity around service quality, delivery timing, and refund flexibility.

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Chargeback Value Trends Across 2025

Even as chargeback rates declined in Q1 2025, the financial impact told a different story. Chargeback values surged to $361.31, marking a 48% year-over-year increase from Q1 2024. This jump indicates that early-year disputes were concentrated among higher-value purchases, likely driven by big-ticket holiday buying and targeted fraud attempts where attackers focus on maximizing payout per incident.

By Q3 2025, average chargeback values fell to $301.91, normalizing as overall dispute volume increased. This shift suggests a return to more routine, lower-value disputes tied to everyday digital purchases. However, despite the decline, values remain elevated compared to historical norms, reinforcing that merchants now face a dual challenge: higher chargeback frequency combined with sustained dollar impact per dispute.

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Industries Seeing the Biggest Jump in Chargeback Values

Chargeback values rose most dramatically in B2B software and services (+50%), where higher-value contracts and less frequent dispute cycles magnify the financial impact of each chargeback. Payments (+29%) followed with a significant jump from $361.31 to $466.08, indicating increasingly expensive disputes in this high-volume, high-risk environment. Travel & reservations (+17%) and restaurant ordering (+14%) also saw increases, suggesting greater chargeback severity tied to fluctuating travel plans, service dissatisfaction, or post-purchase regret.

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The Consumer Experience with Disputes

As commerce continues to move online, consumer disputes have become an unavoidable part of doing business. What began as a mechanism for resolving legitimate issues has evolved into a complex ecosystem, mixing valid chargebacks, fulfillment frustrations, and opportunistic misuse. Sift’s consumer survey* reveals how shifting economic pressures, heightened expectations, and the viral spread of “refund hacks” are reshaping how and why consumers challenge transactions.

Why Consumers Dispute Transactions

Fraudulent purchases remain the leading trigger of disputes. 38% of consumers cited unauthorized purchases as their reason for filing a dispute. However, a growing share of disputes now stem from operational and fulfillment frustrations—18% for delayed refunds and 17% for missing or late deliveries.

This expansion beyond traditional “fraud” disputes points to the evolving expectations of the digital shopper. Dispute behavior now mirrors the customer experience lifecycle itself, encompassing everything from delivery speed to product accuracy. Categories like clothing, digital app subscriptions, and home goods are among the most disputed.

Rising First-Party Fraud & Refund Schemes

First-party fraud is now the world’s most prevalent fraud type. It represents 36% of all reported fraud in 2024—up from just 15% a year earlier—on top of a $132 billion risk to e-commerce. One forecast projects a 40% rise in first-party fraud by 2026, with global chargeback volumes reaching 337 million transactions.

Sixteen percent of consumers admit to filing a false fraud claim (a form of first-party fraud) despite being satisfied with their purchase. Many now view chargebacks as a form of customer leverage rather than a fraud safeguard.

Their motivations are telling: delayed delivery (18%), perceived unethical merchant behavior (17%), and confidence that their card issuer would reverse the charge (12%) all ranked high. Groceries (26%) and digital subscriptions (20%) lead the list of categories tied to first-party misuse—areas characterized by convenience, frequency, and financial strain.

The “Refund Hack” Economy

Economic pressure continues to influence consumer behavior, driving some to adopt unconventional methods to save money. The democratization of fraud has significantly lowered the barrier to entry, as social platforms and online communities make refund abuse tactics widely available. Creators share step-by-step “refund hacks” designed to dispute legitimate purchases or exploit return policies. Meanwhile, Fraud-as-a-Service (FaaS) offerings on the deep web and messaging apps like Telegram provide on-demand access to tools and tutorials, enabling refund manipulation at scale.

Sift’s survey shows that 22% of consumers have encountered online refund tutorials, mainly on TikTok (34%) and Facebook (29%), and 10% admit to trying these tactics themselves, such as returning worn items. One in five (20%) say they’d be more likely to use such methods during financial hardship—evidence that economic pressure, accessibility, and social influence are eroding the boundaries between legitimate consumer behavior and fraud.

How Disputes Lead to Brand Abandonment

Disputes rarely end when a refund is issued. Nearly one in four consumers (24%) experienced additional online fraud after filing a dispute, indicating that the compromised payment methods weren’t shut down fast enough. The most common follow-on abuses, payment fraud (52%), scams (51%), and account takeover (29%), underscore how one dispute can cascade into wider digital vulnerability.

The reputational toll is equally severe. Sixty-two percent of consumers say they would be less likely or would stop entirely shopping with a brand after experiencing fraud. For merchants, every dispute now threatens far more than financial recovery. It puts hard-won customer acquisition investments at risk and undercuts long-term customer lifetime value. In a world where customer acquisition costs (CAC) continue to rise and loyalty is fragile, a single fraud event can have lasting downstream effects on retention and brand trust.

Agentic AI and the Next Wave of Disputes

Agentic commerce, where AI agents independently research, compare, and complete purchases, is poised to reshape digital shopping and could unlock $3 to $5 trillion in global revenue by 2030. But this shift is already creating new trust gaps. Nearly half of consumers (47%) are worried about AI agents making unauthorized purchases, and when orders go wrong, accountability is unclear. Sixty-one percent would blame the AI company, while 39% would fault the merchant.

As automated purchasing grows, businesses should expect a temporary rise in disputes as consumers adjust and fraudsters test new vulnerabilities. Over time, stronger authorization standards and trusted agent protocols could reduce first-party fraud by clarifying intent and approval. For now, merchants, payment providers, and AI platforms share a common challenge: preventing misuse while helping consumers understand who, or what, is driving each purchase.

As disputes and chargebacks continue to rise, and first-party fraud becomes an increasingly significant part of overall dispute volume, businesses face growing operational and financial pressures. Leveraging proactive fraud prevention and streamlined dispute management helps companies reduce losses, protect revenue, and maintain long-term customer trust.

Alexander Hall

Trust and Safety Architect at Sift

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Understanding Generational Differences in Consumer Disputes

Dispute behavior doesn’t look the same across generations. Differences in digital fluency, economic pressure, and social influence shape how consumers engage with chargebacks. Younger generations, raised in an environment of instant refunds and frictionless payments, are both more likely to challenge transactions and more comfortable testing the boundaries of what counts as fraud. Older generations, meanwhile, remain cautious but less adaptable, with lower dispute volume and minimal exposure to emerging refund manipulation tactics.

While Gen X holds the highest overall dispute participation, Gen Z and Millennials are driving the surge in repeat disputes, false claims, and use of social “refund hacks.” Baby Boomers remain the least likely to dispute or misuse refunds, but their growing distrust of AI agents signals a new form of digital vulnerability.

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Mitigating Chargebacks through smarter prevention

Businesses must understand the true cost and consequences of chargebacks. Excessively high chargeback rates typically triggers scrutiny from acquirers and card networks, potentially placing merchants into programs like Visa’s Acquirer Monitoring Program or Mastercard’s Excessive Chargeback Program, which carry higher fees and mandatory corrective actions. Under VAMP, the “excessive” threshold is set at 1.5% starting October 1, 2025, dropping to 0.9% on January 1, 2026, with a $10 fee per disputed transaction for merchants above the limit. Businesses must prevent fraud pre-transaction to manage VAMP, using tools like RDR, CE 3.0, or CDRN, improving policies, and changing acquirers if ratios remain high.

Sift’s award-winning platform provides real-time transaction analysis, identifies potential fraud, and automates dispute management, helping businesses prioritize winnable cases, reduce financial losses, and protect revenue. By combining comprehensive fraud prevention with efficient dispute handling, companies can stay ahead of evolving fraud tactics while maintaining a secure, seamless customer experience.

*On behalf of Sift, Researchscape International polled 1,075 adults (aged 18+) across the United States via online survey in October 2025.