Customer Service

As e-commerce fraud rises, merchants need to win consumer trust to win their wallets

Unfortunately, there are many ways fraudsters take advantage of online platforms and customers. As a first step in building up defenses, retailers should be aware of each type of fraud and be sure to monitor for patterns of unusual behavior.

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September 19, 2025 by Iryna Bondar — Senior Fraud Group Manager, Veriff

Upon hearing the word "fraud," the first thing that often comes to mind for most people is financial services fraud, such as a stolen credit card or a hacked bank account. However, fraud can occur across a wide range of industries, and the e-commerce sector is no exception. Veriff research finds e-commerce is the number one industry to suffer at the hands of authorized fraud scams — and, by a considerable margin, more than 18 times the global average.

Why? Scammers follow the money, and e-commerce sites and marketplaces are now handling massive transaction volumes: in the first four months of 2025, U.S. online shoppers spent an average of $3.62 billion per day. Plus, while banks and credit card companies have tightened their fraud defenses in the past decade, many e-commerce sites and marketplaces haven't made the same protections, causing them to be easy targets.

Not only does this troubling trend put finances at risk, but it also makes these sites vulnerable to declining consumer confidence, decreased reputation, and increased regulatory scrutiny. So what can e-commerce sites and marketplaces do to keep their customers, and themselves, safe in today's "wild west" of fraud?

Recognize the top types of e-commerce fraud

Unfortunately, there are many ways that fraudsters take advantage of these online platforms and their customers.

As a first step in building up fraud defenses, business owners should be aware of each of these types of fraud and be sure to monitor for patterns of unusual behavior.

• Refund fraud involves fraudulent actors posing as customers and requesting refunds for products that they never actually purchased. AI has contributed to the rise of this type of scam, as fraudsters increasingly use AI-generated deepfake videos and voice cloning to impersonate individuals.
• Identity theft occurs when fraudsters steal personal information to create accounts or make purchases in someone else's name.
• Return fraud involves customers purchasing items and intentionally returning them after they have already been used or damaged. It can lead to inventory losses and increased operational costs.
• Chargeback fraud happens when a customer makes a purchase and falsely claims they didn't receive the product or service, or that it was unauthorized, to receive a refund from their bank. This not only results in financial losses but also can affect the merchant's chargeback ratio.
• Account takeover fraud typically occurs after a data breach, when marketplaces' data is stolen to gain access to users' accounts and credit card information. The information is then used to make unauthorized purchases or changes.

That is why businesses should be sure to train their employees to recognize the above types of fraud. One recommendation is to host a bi-annual training session, as these fraud tactics can evolve quickly.

Tap into emerging technology

When it comes to making e-commerce sites and marketplaces safer, AI poses both risks and opportunities. Indeed, AI is a growing danger for organizations in all sectors, with 60% of company leaders reporting an increased use of AI in attacks. With the rise of AI-generated images, text, and deep-fake videos, it's becoming easier than ever for fraudsters to pose as legitimate customers.

But as the saying goes: if you can't beat them, join them. Many e-commerce fraud professionals agree that one of the best ways to combat AI attacks is to use AI tools as a defense. AI-powered identity verification and biometric authentication tools, for example, can be used to detect fake identities, analyze suspicious behavior, and prevent unauthorized transactions. Tracking these types of behaviors manually is often too cumbersome, time-consuming, and expensive for organizations, especially with large transaction volumes — but AI can quickly monitor for patterns of fraud and identify suspicious activity early on.

Another upside to using AI tools is that they often provide a quick and seamless experience for legitimate users. That means less friction at checkout and fewer abandoned carts, creating a win-win for businesses and customers.

Ensure compliance with local regulations

Failing to identify fraud behavior can not only leave businesses vulnerable to lost revenue, but it can also land them in hot water with regulators. For example, the US financial market operates under several key regulations, including the Bank Secrecy Act, which focuses on preventing money laundering; IRS guidelines on compliance for financial reporting and transparency; and FinCEN AML rules, which are aimed at combating fraud and other financial crimes.

Business owners should be aware of what regulations they must adhere to to remain compliant. These regulations can change over time, so setting reminders to check every few months or so can help business owners keep up.

It's worth noting that these rules aren't just bureaucratic hurdles; they're designed to protect consumers and businesses alike. Following them can help reduce the risks associated with fraud and demonstrate businesses' commitment to trust and transparency.

Why fraud prevention matters

It is clear that in e-commerce, fraud prevention is no longer a "nice to have" — it's an imperative for your business. Fraud can lead to significant financial losses, lost inventory, increased operational costs, poor chargeback ratios, and more. For this reason, strong security measures and proper staff training are worthy investments in the future health of your business and your bottom line.

What's more, exposing customers to financial loss or data breaches can present significant reputational risk — especially in the social media age, where many customers air their grievances with companies publicly. Building stronger security measures can increase consumers' trust and their willingness to buy. In e-commerce, trust is the essential currency: without winning customers' trust, you can't capture their wallets.

About Iryna Bondar

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