The digital retail and ecommerce space is a hyper-connected and complex marketplace where fraud is increasing rampantly. The velocity at which the fraud is happening isn’t the only E-commerce security concern; it is also getting more sophisticated – outpacing traditional methods.
Fraud is getting more sophisticated
As Artificial Intelligence (AI) and technology advance its fraud prevention solutions, fraudsters are also constantly developing new tactics and methods of deception to exploit vulnerabilities across online and in-store channels —from highly organized schemes to micro-level attacks that often go unnoticed until it’s too late.
Some of these methods, like synthetic identity fraud or AI-driven impersonation, are nearly impossible for human analysts to detect alone. For retail and e-commerce companies, the stakes are astronomically high - a single breach can result in massive financial losses, and affect a store’s trust and safety value.
Risks & challenges in retail & e-commerce
Retailers committed to amping up the security measures are facing a growing challenge: how to protect their organization and customers without compromising the seamless shopping experience.
● Buy Now Pay Later (BNPL) services
BNPL services have exploded in popularity but criminals are creating opportunities to steal identities or synthetize identities to create accounts and place orders with minimal upfront risk. Chargebacks and default on payments can rapidly increase if AI-solutions designed for early detection of fraudulent behavior is not utilized.
● Balancing security with customer experience
Retailers face a delicate balancing act: high friction at checkout may drive customers away, while limited security opens the door to fraud. Achieving the right equilibrium requires fraud prevention solutions and nuanced strategies that can adapt to each transaction’s risk level in real time
● Synthetic identity Fraud
Fraudsters leverage data breaches to piece together names, addresses, dates of birth, Social Security numbers to impersonate real individuals or forge synthetic identities. AI-solutions in retail fraud act as a barrier when fraudsters create a new, “valid” persona to bypass standard credit checks to open new accounts or secure BNPL loans.
● Returns & refunds abuse
Malicious actors exploit return policies by making false claims such as the item never arrived or by returning used, damaged, or counterfeit goods as though they were legitimate returns. Fraud prevention solutions can prevent direct financial losses on retailers who must allocate resources to verify claims, process refunds, and restock items.
● Chargeback fraud
When a cardholder disputes a transaction, claiming they never received the product or that the purchase was not authorized, merchants face a dual cost. Preventing loss of the product and the payment, plus fines and fees incurred from payment processors requires highest grade of E-commerce security solutions.
How AI can help in mitigating fraud
AI in mitigating fraud across the retail and e-commerce sector is increasingly being implemented. Several types of AI, including generative AI, are being considered by retailers. There are a number of ways AI can help mitigate fraud.
- Behavior monitoring in online stores
Computer vision applications in online stores are already transforming the shopping experience. Some of the applications include automated self-checkout, product detection, abandoned object detection, and more. But, the one that stands out is behavior monitoring.
Modern AI-solutions for retail fraud such as computer vision and AI algorithms can showcase patterns that help the retailers determine whether a person intends to purchase, steal, or just browse. These AI solutions further pave the way for detecting the ever-evolving anomalies and develop insights for fraud identification and prevention in online retail.
- Transaction & fraud monitoring
AI-powered systems can also analyze transactions, flagging suspicious patterns that rules-based systems might overlook. These systems can detect transaction anomalies—like mismatched shipping addresses or sudden spikes in purchase volume—and alert retailers in real time to potentially fraudulent activity. Businesses can quickly isolate and investigate suspicious transactions without burdening legitimate customers by capturing a more holistic view of customer behavior.
E-commerce marketplaces with a higher volume of daily transactions also benefit enormously from fraud monitoring. These E-commerce security monitoring systems can spot fake listings, manipulated customer reviews, or bot-driven traffic patterns that compromise the platform’s integrity. Intelligent automation can help reduce the time and labor needed for manual reviews, strengthen user trust, and ultimately safeguard both their bottom line and reputation.
How TP can help
Retailers and E-commerce marketplaces looking to enhance the customer experience and strengthen their fraud prevention capabilities can benefit from Teleperformance’s comprehensive suite of AI-enabled digital solutions.
- Elevate the customer experience: Combine robust security with a frictionless buying journey, ensuring genuine customers are never hindered by excessive verification steps.
- Drive continuous innovation: Stay ahead of evolving threats with advanced analytics, data-driven insights, and emerging AI technologies.
- Scale intelligent automation: Automate routine checks, dispute resolutions, and data processing to streamline fraud management and lower operational costs.
Conclusion
AI-driven fraud solutions are rapidly becoming essential tools in the fight for maintaining a balance between robust security measures and a seamless customer experience —continuously learning from new data, analyzing customer behaviors in real time, and spotting anomalies that might escape the human eye. Whether it’s monitoring transactions across channels, detecting unusual behavior in-store, or authenticating identities, AI empowers retailers and e-commerce marketplaces to stay ahead of fraudulent activities without compromising the speed and ease of modern shopping experiences.