Report: Consumers Turning to Chargeback Fraud as Tactic Goes Mainstream

Sift’s Q4 2024 Digital Trust Index reveals alarming 78% year-over-year rise in chargebacks, mass adoption of first-party fraud

Sift, the AI-powered fraud platform securing digital trust for leading global businesses, today released its Q4 2024 Digital Trust Index. The report uncovered a significant surge in first-party fraud and chargebacks that poses substantial challenges for businesses across multiple sectors.

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As global e-commerce revenues are expected to grow 14% to $4 trillion in 2024, the Index reveals a troubling landscape of digital transactions, with dispute rates rising by 78% year-over-year in Q3 2024. Further, in Q1 2024—known as the “chargeback season” following the December holidays —chargeback values increased 59% to $374 from the previous year.

Specific sectors have been hit hardest, with online travel and lodging experiencing an astonishing 816% increase in chargeback rates, e-commerce seeing a 222% increase, and digital goods and services rising by 59%.

Amid heightened economic pressures, many consumers are turning to chargeback or “friendly” fraud to save money. And with Sift’s report finding that 27% of consumers encounter online content offering “hacks” to get refunds despite being satisfied with their purchase, it’s easier now than ever for shoppers to take advantage of refund and dispute policies.

As a consumer tactic, chargeback fraud also has a stark generational divide. According to Sift’s report, younger generations are much more willing to take part in it: 42% of Gen Z admits to engaging in chargeback fraud, compared to 33% of Millennials, 21% of Generation X, and only 6% of Baby Boomers.

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“We’re seeing the normalization of chargeback fraud, with younger generations increasingly viewing disputes as a legitimate avenue for cost savings, especially as they continue to feel high levels of economic anxiety,” said Kevin Lee, SVP of Customer Experience, Trust & Safety, at Sift. “Ultimately, businesses are the ones facing the consequences, and as both chargeback and ‘true’ fraud continue to surge, companies need to equip themselves with AI-powered technologies to both prevent abuse and fuel profitable growth.”

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