By Martin Sweeney, CEO, Ravelin
Merchants can no longer view fraud as a cost of doing business – it’s a consequence of ignoring your data.
As online retail continues to grow and evolve, so too does the fraud that threatens it. This isn’t just about shadowy networks of criminals operating out of hidden corners of the internet. Increasingly, the perpetrators are brands’ own customers.
The fraud landscape of the present and the future is being shaped by an uncomfortable reality: shoppers – everyday consumers from various demographics are using the policies designed to make online shopping seamless against the very businesses that offer them. From refund abuse and promo exploitation to falsified requests for chargebacks merchants are losing millions to people they once considered loyal.
And as our latest Global Fraud Trends Report at Ravelin shows, the problem is getting worse. 77% of global merchants report a year-on-year increase in fraud. The average business is now losing $10.6 million annually. Retailers and travel companies are hit hardest, each losing around $11 million per year. At the same time, nearly half of merchants (47%) say that customers, not professional fraudsters, now pose the greater threat.
So why is this? It has much to do with merchants themselves making it too easy and too tempting for growing numbers of consumers to behave dishonestly.
Merchants have spent years cultivating frictionless shopping experiences, building refund policies and loyalty schemes that reward convenience above all else. In doing so, they’ve inadvertently created opportunity and incentive for misuse. The majority of merchants say seamless refunds are crucial to their business model – but the close to half say they receive refund requests on more than 5% of their sales, and most believe over 5% of those claims are fraudulent.
Throw artificial intelligence into the mix and things get even more complicated. AI-powered fraud, from synthetic identities to phishing attacks, is already here, and nearly two-thirds of merchants believe they’ve been targeted by it. It is largely the same people perpetrating fraud and abuse but, with AI tools widely accessible, their attacks are becoming more automated, more sophisticated and more frequent.
Yes, the fraud landscape has grown in both complexity and scale. But that doesn’t mean merchants are powerless. In fact, they already have the most important tool at their disposal: their own data.
The key to tackling modern fraud lies in shifting how we think about customers – from a binary “good or bad” to something far more nuanced. With the right fraud prevention solutions, powered by machine learning and AI, businesses can understand their customers better than ever: how each consumer normally shops , what’s unusual behaviour for them, and where there are signs of risk or opportunism.
This allows merchants to make smarter, more human decisions. Fraudsters can be blocked. Honest customers can move seamlessly through the checkout, without unnecessary disruptions. And those in the grey area – the opportunists, the one-time offenders – can be flagged, educated, and even brought back into the fold through rehabilitating nudges and fine-tuned communications.
It’s not about punishing customers; it’s about understanding who they are, how they behave and why they behave in this way in more detail. Done well, fraud prevention does not introduce friction instead it builds trust. It protects the good customers while preserving operational integrity.
Yet, many merchants are still reluctant to act. Our research shows 66% of companies prioritise customer loyalty and brand reputation over stopping refund abuse. That’s understandable; no one wants to alienate their customer base. But it’s a false choice. You don’t have to pick between experience and protection. With the right approach, you can have both.
What’s stopping businesses from taking action? Often, it’s internal inertia: concerns about customer churn, public image, or simply not knowing where to start. But ignoring fraud won’t make it go away, it’ll only cost more in the long run. Fraud impacts revenue, operations, morale, and reputation. In our survey, revenue overtook growth as the business metric most affected by fraud for the first time this year.
The good news? You don’t need to overhaul everything at once. Start with your data. Understand where abuse is happening and how. Use that insight to adjust policies, tighten loopholes, and tailor your response to individual behaviours. Machine learning and automation can help, but human judgment is still vital.
Fraud will always evolve. So must your defences. But by making a date with your data – treating it not as an afterthought but as your first line of protection – merchants can reclaim control. You’ll not only reduce losses but also protect your brand, your customers, and your future growth.
In a world where the lines between friend and fraudster are increasingly blurred, knowledge is power. And you already have it.
