According to Ravelin’s Global Fraud Trends in Online Retail Report, 76% of retailers have seen fraud increase in the past year, with 16% reporting a significant rise. The report finds that fraud is costing online retailers an average of $11 million a year.
Ravelin finds that customer fraud, including refund abuse, false chargebacks and promo manipulation, has overtaken fraud committed by criminals. One in three retailers polled agree consumers are their biggest threat, compared with 30% pointing to criminals. Nearly 40% (38%) of retailers agree that both customers and criminals present an equal threat.
The trend is particularly acute among clothing, accessories, and beauty retailers. Over half (52%) report their own customers are more likely to attempt fraud in the past year. For computer and electronics retailers, 47% have seen increased customer fraud. For all other retailers, the figure falls to 28%.
The study, which focuses on online retail enterprises, highlights a shift in the retail fraud landscape, with customer fraud becoming mainstream. Opportunism, policy abuse and false claims are now part of everyday shopping behaviour, making them harder to detect and stop without creating friction for legitimate customers.
Retailers are finding fraud prevention is increasingly complex and expensive to manage, according to the study. Over the next year, 63% of retailers expect fraud to increase, and 83% expect to spend more on prevention measures.
Balancing friction and security
While AI brings new precision to fraud prevention, it also raises the age-old dilemma of security versus customer experience. Ravelin’s research shows that 53% of retailers favour a balanced or “dynamic friction” approach, adapting checks based on risk level, while 41% still prefer to block as many potential fraudsters as possible, even at the expense of creating friction for genuine customers. Only 6% would rather allow more transactions to go through unchecked.
AI-native solutions and automation
More than three-quarters (76%) of retailers have turned to AI-powered tools to tackle the growing complexity of online fraud.
O’Riada explains that it is important to see artificial intelligence-powered solutions not just as a defensive tool, but as a way to fine-tune the customer journey. By automating and personalizing fraud prevention strategies, merchants can target specific fraud types without slowing legitimate buyers. On the contrary, these fraud solutions provide an opportunity to also improve the experience of good shoppers, selling more and building customer loyalty.
The most commonplace forms of e-commerce fraud for key retail sectors
Clothing, accessories and beauty
CNP (card not present) fraud 66% | Fraudulent chargebacks 43% | Refund abuse 26% | ATO 25% | Promo abuse 18% | Supplier fraud 9%
Computers and electronics
CNP 53% | Fraudulent chargebacks 50% | ATO 29% | Promo 20% | Refund 17% | Supplier fraud 18%
Other retail (home, lifestyle, general)
CNP 60% | ATO 35% | Fraudulent chargebacks 32% | Refund 22% | Promo 19% | Supplier fraud 18%
Ravelin’s machine learning platform is designed to help merchants manage this complexity at scale by reducing false positives, uncovering suspicious behaviour and balancing fraud detection with customer experience – crafting frictionless journeys for good customers while blocking criminals and rehabilitating opportunists.