The payments industry’s long-standing battle against fraud may be producing unintended casualties.
According to new data from Chargebacks911, the cost of false declines—legitimate transactions incorrectly rejected by fraud filters—has now surpassed the financial toll of actual fraud losses.
The findings, detailed in the firm’s latest Cardholder Dispute Index and Chargeback Stats reports, paint a worrying picture of how aggressive fraud prevention systems are quietly draining merchant revenue and customer goodwill.
Fraud filters are designed to protect merchants, yet they are increasingly blocking genuine customers at checkout.
Chargebacks911’s analysis suggests that these systems may block up to 75 times more legitimate revenue than the fraud they successfully prevent.
The cost goes far beyond lost sales: 80% of cardholders surveyed said a false decline is not just inconvenient but embarrassing, with most choosing to shop elsewhere afterward.
A Costly Design Flaw in Fraud Prevention
Donald Kossmann, Chief Technology Officer at Chargebacks911 and a former Microsoft engineer who helped build the company’s own fraud systems, argues that many fraud filters are fundamentally miscalibrated.
“Every false decline is a failure of design,” Kossmann says. “It’s easy to focus too much on catching fraud and forget the cost of blocking the wrong people. If you spend a million dollars on fraud tools that end up rejecting ten million in clean revenue, you’re sabotaging your business.”
This misalignment, he suggests, has created a “false sense of security” among merchants and payment providers who celebrate every fraudulent transaction stopped—without counting the legitimate ones lost in the process.
The Ripple Effect: More Disputes, Less Trust
The 2025 Cardholder Dispute Index reveals how quickly negative experiences can spiral into wider problems.
Nearly half of surveyed cardholders said they bypass merchants and go straight to their bank when an issue arises, while 39% struggle to identify charges because of unclear billing descriptors.
Once a dispute succeeds, over 90% say they are more likely to file another in the future, fuelling a cycle of mistrust and escalating chargeback rates.
The company’s Chargeback Stats report underscores the scale of the issue: the average cardholder filed 5.7 chargebacks in 2023, each worth roughly $76, totalling more than $65 billion globally.
Meanwhile, 72% of merchants reported a rise in friendly fraud chargebacks last year, and eCommerce chargeback rates surged 222% in just 12 months.
Accuracy Over Aggression
Kossmann believes the next generation of fraud prevention must prioritise precision over blunt-force blocking.
“Fraud prevention can’t just be about stopping as much as possible,” he says. “It has to be about protecting real customers, even when their behaviour looks messy on paper. Treating your best customers like criminals is not innovation.”
Chargebacks911 is calling on merchants, issuers and processors to recalibrate fraud strategies toward smarter, data-driven accuracy.
Without such a shift, the industry risks turning its own defences into a hidden cost centre—where the fight against fraud ends up costing more than fraud itself.
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