Digital security apps are learning to distinguish hard-pressed shoppers from serial abusers and organized “buy now, pay never” rings.

First-Party Fraud Moves to Center Stage

For years, eCommerce fraud conversations focused on stolen cards and synthetic identities. In 2024 and 2025, a quieter but more insidious threat has surged: first-party fraud, often labeled friendly fraud or first-party misuse. In these cases, the person committing fraud is the actual account holder or a real customer, not a stranger using stolen credentials.

Global surveys of merchants show that refund and discount abuse, as well as first-party misuse, now rank among the most common fraud types impacting nearly half of merchants.Cybersource Chargeback field reports indicate that friendly fraud may account for half or more of all chargebacks for many merchants, driving up operational costs and forcing some to raise prices to compensate.Merchant Risk Council

This kind of fraud is difficult to tackle with traditional tools. Transactions often look legitimate at the time of purchase. The problem emerges later, when customers claim they never received goods, dispute authorized charges, or repeatedly exploit returns and promotion policies.

BNPL and the Rise of “Buy Now, Pay Never”

The rapid adoption of buy now, pay later (BNPL) services has amplified first-party risk. BNPL platforms are now responsible for tens of billions of dollars in online spending, with usage projected to keep climbing through 2025 and beyond.Chargeflow While most consumers use these services responsibly, fraudsters and over-extended shoppers are exploiting lenient onboarding and fragmented data sharing between merchants and lenders.

Reports from fraud experts describe “buy now, pay never” scenarios where bad actors create fake or synthetic identities, use BNPL to acquire goods, and disappear before repayment.Merchant Risk Council Others abuse dispute and hardship policies, stringing out payment timelines while reselling merchandise. For merchants, the result is a tangle of lost goods, non-payment, and reputational risk when customers complain publicly about collections activity.

Digital security apps are increasingly integrating with BNPL providers and alternative payment rails. By sharing risk signals in real time, they can help identify suspicious account creation, unusual device patterns, or mismatches between shipping and billing data before orders are approved.

Behavioral Analytics and Identity Graphs

Differentiating a genuine dispute from deliberate abuse requires context. Modern fraud platforms are therefore embedding advanced behavioral analytics into their apps. Instead of looking at each transaction in isolation, they build identity graphs that connect email addresses, devices, IP addresses, and payment instruments over time.Signifyd

A single item-not-received claim from a long-standing customer with a spotless history might deserve the benefit of the doubt. Dozens of such claims across multiple merchants from accounts linked by the same device or IP cluster tell a different story. Likewise, repeated use of promo codes, short-interval refunds, and orders placed just below manual review thresholds can reveal systematic abuse.

These insights are presented to fraud and customer experience teams through case management interfaces and automated risk scores. Some digital security apps now allow merchants to configure nuanced responses: warnings for borderline behavior, stricter verification for returns, or even “soft declines” that encourage customers to contact support instead of outright blocking their orders.

Measuring the True Cost of Abuse

First-party fraud is expensive in ways that go beyond the initial chargeback or refund. Research into the “true cost of fraud” for North American eCommerce and retail shows that for every dollar of fraud loss, businesses may incur around three dollars in total cost when operational overhead, customer support, and reputational damage are included.LexisNexis Risk Solutions+2PR Newswire

Digital security apps can help quantify this impact by correlating abuse behaviors with downstream costs such as support tickets, marketing suppression, and logistics expenses. With better metrics, merchants can make more informed decisions about when to tighten policies, how to communicate changes, and where to invest in automation.

Closing Thoughts and Looking Forward

First-party fraud forces eCommerce brands into delicate territory. Overreact and you risk alienating good customers, damaging loyalty and brand perception. Underreact and abuse can quietly erode margins and distort your understanding of customer value.

In the coming years, the most successful merchants will be those that embrace digital security apps as tools for precision, not blunt force. By combining machine learning, behavioral analytics, and ethical policy design, they can distinguish between hardship, confusion, and organized abuse, responding in ways that protect both their business and genuine customers.

References

“2024 Global Ecommerce Payments and Fraud Report.” Cybersource and Merchant Risk Council. https://www.cybersource.com/content/dam/documents/campaign/fraud-report/global-fraud-report-2024.pdf Cybersource

“The State of Fraud and Abuse 2024.” Signifyd. https://www.signifyd.com/wp-content/uploads/frontify/report-state-of-fraud-report-2024.pdf Signifyd

“2024 Chargeback Field Report: Merchant Survey Reveals Latest Trends and Impacts of Friendly Fraud.” Merchant Risk Council. https://merchantriskcouncil.org/learning/resource-center/member-news/news/2024/2024-chargeback-field-report-merchant-survey-reveals-latest-trends-impacts-of-friendly-fraud Merchant Risk Council

“North American Ecommerce and Retail Companies Face a $3.00 Total Cost for Each Dollar Lost to Fraud.” LexisNexis Risk Solutions. https://risk.lexisnexis.com/about-us/press-room/press-release/20240327-tcof-retail-ecommerce LexisNexis Risk Solutions

“Buy Now, Pay… Never? Rising Fraud in BNPL and How to Prevent It.” Merchant Risk Council / AtData. https://merchantriskcouncil.org/learning/resource-center/member-news/blog/2024/atdata-buy-now-pay-never Merchant Risk Council

Author: Claire Gauthier, Author – eCommerce Technologies, Montreal, Quebec
Co-Editor: Peter Jonathan Wilcheck – Co-Editor, Miami, Florida

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