Fraud in online retail is escalating at a pace that many merchants are struggling to contain, according to new research from an AI-native ecommerce fraud prevention platform Ravelin.
The company’s Global Fraud Trends in Online Retail report reveals that three in four retailers (76%) have seen fraud rise over the past year, with one in six (16%) reporting a significant increase. On average, fraud now costs online retailers $11 million annually.
The findings point to a major shift in the fraud landscape. Customer-originated fraud, including refund abuse, false chargebacks and promotion manipulation, has now overtaken criminal-led attacks. 32% of retailers surveyed identified consumers as their biggest fraud threat, compared to 30% who cited criminals. A further 38% said both groups pose an equal risk.
The issue is especially severe in the clothing, accessories, and beauty sectors, where over half (52%) of merchants reported rising customer fraud. For computer and electronics retailers, the figure stands at 47%, while 28% of other retailers, including home and lifestyle brands, have seen similar behaviour.
According to Ravelin, opportunism, policy abuse and false claims have become part of everyday shopping behaviour, making it increasingly difficult for retailers to distinguish between genuine customers and fraudsters without creating friction at checkout.
“Retail fraud is evolving faster than many merchants can respond. Emboldened by social media and motivated by the cost of living crisis in many places, consumers are trying their hand at fraud. Practices that used to be used by professional cybercriminals have become entrenched in how many people shop today. This blurring of the lines between criminal and customer fraud makes it difficult for retailers to stay ahead.”
Mairtin O’Riada, Ravelin Co-founder & COO
O’Riada warned that if retailers are not careful, every new promotion, returns policy update or convenience feature could open another door to abuse. He added that the challenge for merchants now is not only to stop fraud, but to understand it in all its new forms.
The report highlights that 63% of retailers expect fraud to increase further in the next year, and 83% plan to invest more in prevention.
While AI-powered tools are becoming central to fraud prevention, with 76% of retailers now deploying them, they also bring the ongoing challenge of balancing protection and convenience. Just over half (53%) of retailers prefer a “dynamic friction” approach, tailoring checks to risk levels. 41% still opt for strict blocking, while only 6% are willing to tolerate more risk to maintain a frictionless experience.
O’Riada noted that AI should be seen not just as a defensive mechanism, but as a means to improve the overall customer journey. In this case, intelligent automation not only allows merchants to target specific fraud types but also keeps the experience smooth for legitimate shoppers, thus, boosting sales and customer loyalty.
About the Research
Ravelin commissioned Qualtrics in January 2025 to survey 1,466 fraud and payments professionals across the UK, USA, Canada, France, Germany, Italy, Spain, Australia, Brazil and Mexico. Respondents represented enterprises with over $50 million in annual revenue and/or more than 500 employees, spanning sectors including retail, travel, digital goods and marketplaces.
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