What Are the Trends to Watch in Fraud and Chargeback For The Year 2025?

As digital payments soar in usage, businesses are scaling up their efforts to ensure that consumers are protected from cybercrimes. This is especially true in the case of credit card payments. The key reason is the escalating volume of chargeback fraud being reported worldwide on credit card spending by consumers. Studies show that in the 3^rd quarter of 2024, there was a 78% rise in disputes raised by consumers which resulted in chargebacks.

From hotel bookings to eCommerce sales, chargeback disputes were prevalent in significant volume. The major challenge that businesses face is not because of chargeback disputes, but because of the rampant fraud becoming common in chargeback claims.

With thousands of websites, social media posts, and YouTube videos constantly advising people on tips to commit first-person fraud easily through credit card chargeback disputes, it is no surprise that nearly USD 100 billion is lost annually for businesses globally due to fraudulent chargeback claims. On average, merchants say that 44% of all chargeback claims they process turn out to be fraudulent.

Top 4 Trends to Watch in the Fraud and Chargeback Space

Often dubbed as friendly fraud, the misuse of chargeback policies by consumers is turning out to be a very rampant issue that enterprises must deal with as it can potentially hurt their bottom-line profitability in due course. The best way to deal with such first-person fraud is to be aware of what lies ahead in the spectrum of chargeback disputes and be prepared to fight the potential fraudulent practices head-on.

On this note, let us explore the top 4 trends in chargeback fraud for 2025:

·       The Online Payment Surge

Even with global inflationary pressures and slowing economic growth, consumers worldwide are in no mood to abandon their love for online transactions. It is estimated that the global digital payment market will reach a peak of nearly USD 20.37 trillion in 2025. From education to entertainment and shopping, they are expected to spend significantly on products and services online and a good majority of the transactions will be backed by credit cards.

This translates into a potentially dangerous volume of fraud being propagated across the payment landscape of digital services by utilizing loopholes in the chargeback policies of card issuers and banks. For businesses and banks, this means that they need to prep their fraud prevention and protection measures to handle an exponential scale of suspicious transactions that may be reported as chargebacks for committing first-person fraud.

·       Escalating Synthetic Identity Fraud

Despite regular warnings from government and law enforcement agencies, consumers often fall into the traps of data collectors and give away too much information online. This can include sensitive data such as credentials which can be used to initiate online transactions. However, the biggest danger with such data theft is the potential of synthetic identity fraud. In simple terms, it is the use of sensitive data in combination with fictitious data to create new digital identities which can then be used to commit fraudulent activities such as raising fake chargeback disputes. Criminals are finding new ways to create fake identities that are hard to discover with traditional security solutions. In 2025, synthetic identity fraud will be a major threat, especially in the chargeback fraud space.

·       Booming Subscription Economy

A key driver of digital payments in recent years is the rapidly growing subscription economy worldwide. From movies to music and even software for daily use, there has been a paradigm shift in several industries when it comes to payment plans. Nearly all major business sectors have dished out expensive one-time licenses for their products and introduced subscription-based plans that let users leverage their offerings at a fraction of the licensing fee.

However, the subscription landscape too is witnessing further diversification such as tiered categories, payment options, and much more. Subscriptions are often tied to credit cards and hence they are a major playground for fringe elements to initiate chargeback fraud schemes.

·       AI-driven Fraud

In addition to first-person fraud, a major chunk of chargeback claims occurs due to unsuspecting transactions initiated by the card owner in response to phishing and other scam attempts. The glaring difference in phishing activities today is the use of AI to create very realistic emails and promotional content for fake or fraudulent payment schemes that consumers are easily lured into. Generative AI is used to create fake videos of even popular celebrities and influencers to fool unsuspecting viewers into making payments for bogus business deals or services. Upon realizing their mistake later, these consumers dispute the credit card spending and claim chargebacks.

AI will be a major challenge in 2025 as it will be used significantly to create avenues of deceiving people into performing fake transactions which can lead to chargeback fraud.

Staying Ahead of the Risk is Key

It is difficult for businesses to escape from the constantly evolving landscape of chargeback fraud. However, they can build effective security measures that can identify suspicious transactions and help create awareness among end customers to safeguard their card transactions. But, for this to happen, there is a need for strategic guidance from experienced payment solution providers like Verinite to help stay ahead of the risk trends in the chargeback space. Our experienced consultants can help select the right payment solutions with the right security roadmap to prevent fraud from ever happening in priced digital ecosystems. Get in touch with us to learn more.