Imagine buying a plane ticket, taking the trip, and then disputing the charge. It may sound like a system glitch, but it’s a growing form of dispute abuse known as first-party fraud—often called friendly fraud. It occurs when consumers use the dispute process to reclaim funds for goods or services they intentionally purchased and/or already used.
First-party fraud has gone from a background concern to one of the biggest categories of human-initiated fraud worldwide. It has also become the leading global attack vector for businesses, costing companies an estimated $100 billion annually. A big reason it’s accelerating is cultural. Scroll TikTok for five minutes and you will find videos teaching people how to “win” disputes on purchases they made—all framed as “life hacks”. It’s mainstream content, and it’s quietly reshaping consumer behavior.
Credit unions are feeling this pressure. America’s Credit Unions reported that 79% of credit unions experienced more than $500,000 in direct fraud damages in 2024, a higher impact rate than any other financial sector. (America’s Credit Unions, 2024) On top of that, the FTC found that consumer fraud losses topped $12.5 billion last year, up 25% from 2023. (FTC, 2024)
Addressing this kind of fraud creates a member experience (MX) paradox. In the race to provide instant, frictionless financial experiences, institutions have inadvertently created a vacuum that makes it easier for people to cheat. Consequently, honest members pay a MX tax through increased friction, slower service, and increasingly defensive processes.
The dispute process is now the front line
Here is the uncomfortable truth: the payment dispute process at most credit unions was built for a different era. It was designed for lower transaction volumes and simpler fraud patterns. Today, financial institutions are fielding an estimated 238 million chargebacks a year, and most disputes take somewhere between 45 and 90 days to resolve. (Casap / PR Newswire, 2024)
That gap between how disputes feel to members and how disputes work inside institutions is where first-party fraud thrives.
In practice, dispute handling often involves a claim with limited context, causing back-office teams to manually reconstruct what happened, search for scattered evidence, all while compliance timelines are ticking. If the dispute is legitimate, the delay chips away at consumer trust. If it’s fraudulent, the delay gives fraudsters more runway, reinforcing that the system can be gamed.
Anatomy of the threat: Beyond “fraudster vs. member”
To address first-party fraud, we have to move beyond the binary view of bad actors versus good members. The reality is a spectrum of intent:
- The honest mistake: Confusion over merchant names, billing descriptors, or forgotten subscriptions
- The opportunist: Using disputes like a “refund button” due to buyer’s remorse
- The strategic fraudster: Deliberately exploiting digital banking for financial gain
This is why traditional fraud tools often fail. They were built for stolen identity fraud, where the member is not who they say they are. In friendly fraud cases, the member often is who they say they are. That makes it harder to detect and even harder to resolve without damaging the relationship.
In other words: first-party fraud is not only a criminal problem. It is also a communication and process design problem.
The hidden cost of disputes
For credit unions, the cost of a bad dispute experience goes far beyond the dollar amount of any single claim—it leaves a lasting MX impression. Research shows that members who experience fraud are 31% more likely to leave their institution entirely, even if the institution did nothing wrong. (Abrigo, 2025)
That creates a difficult balancing act. You want to protect the institution from losses, but you also want to protect honest members from being treated like suspects.
Where agentic AI changes the equation
Closing the gap requires a new, innovative approach to dispute resolution and fraud detection—replacing fragmented tools and processes with a holistic solution that builds trust while fighting fraud.
Several credit unions that have already modernized their dispute workflows to meet this new standard by leveraging solutions like Casap. Chartway Credit Union reduced dispute resolution times from 90 days to 2 days (12 days on average), while cutting per-claim costs by almost 90%. They also reduced write-offs by 72% and achieved a 95% chargeback win rate. Notably, member satisfaction increased, proving that operational efficiency and member experience can improve in tandem. (Casap internal analysis, 2025) (on file with author)
A better path forward
The best long-term answer to first-party fraud isn’t just better detection. It’s better transparency.
That means helping honest members recognize their own spending before they ever reach the dispute button. When members understand what they’re seeing, many disputes never happen in the first place—and we move from dispute management to preemptive MX.
We cannot solve first-party fraud by building higher walls. We must build clearer windows. The future belongs to those who modernize disputes in a way that is faster, smarter, and still human.
If you’ll be at GAC, I’d love to connect. I’ll be there with the Casap team, and we’re always interested in hearing how credit unions are handling disputes in practice. If you’d like to talk through your current dispute process and what’s working (or not working), feel free to book a few minutes with us.
