The payments industry has been combatting fraud for many years. But according to Chargebacks911, a global firm focused on dispute resolution and chargeback prevention, data reveals that merchants are losing more money and goodwill to false declines than to fraudulent activities. This appears to be part of a growing set of problems resulting from increased levels of automation.
By automating platforms with AI and other automation tools, many platforms are experiencing a wide range of serious problems. For instance, some legit users can even be blocked from accessing certain services because AI algorithms mistakenly take them for being bots or malicious. Similarly, legit customers who can drive revenue growth are being turned down due to false declines, a pressing issue considering it has already been a very challenging environment for business owners.
The findings, drawn from the firm’s Cardholder Dispute Index and Chargeback Stats, indicate how “blunt” fraud filters are gradually eroding revenue, trust, and loyalty at an alarming rate.
Fraud filters are support to protect legit businesses, however, they now seem to be blocking good customers at checkout time.
Chargebacks911’s analysis shows that these systems can “mistakenly block 75 times more legitimate revenue than the fraud they stop.”
And when a clients gets turned away, it is not just a missed sale opportunity.
The majority or 80% of cardholders state that being “falsely declined is not just annoying but embarrassing, and most will simply take their business somewhere else.”
Donald Kossmann, CTO at Chargebacks911, worked at Microsoft, where he reportedly built the firm’s so-called fraud filter.
He asserts the industry has the balance “wrong.”
He also claims:
“Every false decline is a failure of design. I’ve built these systems myself, I know how easy it is to focus too much on catching fraud and forget the cost of blocking the wrong people. Merchants celebrate when a filter stops fraud, but if that same system rejects thousands of good customers, what did you really save?”
The company’s 2025 Cardholder Dispute Index shows how quickly these experiences spiral.
Almost half or about 50% of cardholders actually admit they bypass the merchant altogether and “go straight to their bank when they suspect a problem.”
Meanwhile, it is also being reported that another “39% say they struggle to even recognize charges on their statement because billing descriptors are unclear.”
And when a dispute is actually successful, more than “90% of cardholders say they feel encouraged to file another.”
That feedback loop is now said to be driving a significant increase in disputes.
According to Chargeback Stats, the average cardholder filed “5.7 chargebacks in 2023, each worth about $76, adding up to over $65 billion in disputes.”
And the majority or “72% of merchants reported an increase in friendly fraud chargebacks in 2024, while eCommerce chargeback rates jumped 222% in just one year.”
Kossmann says the industry needs a reset.
Chargebacks911 is now said to be urging merchants, issuers, and processors to reset the balance.
Fraud prevention can’t only be about blocking whenever it is possible.
It has to also be about protecting real clients, even when their behavior looks a little off.