E-commerce fraud protection: Detection and prevention in 2025

Introduction: The growing threat of e-commerce fraud

Over the last few years, e-commerce has become an indispensable part of global retail, reshaping the way businesses and consumers interact. Like many other industries, buying and selling goods has undergone a substantial transformation following the advent of the Internet, evolving from physical stores to digital storefronts accessible anytime, anywhere. Thanks to the ongoing digitalization of modern life, consumers all over the world now enjoy the convenience, variety, and efficiency of online transactions. Whether it’s purchasing groceries, clothing, or even large-ticket items like electronics, e-commerce has revolutionized the retail experience.

As global internet access and adoption continue to grow rapidly—with over five billion internet users worldwide—the number of people making online purchases is ever-increasing. This is fueled by the expansion of internet connectivity, advances in mobile technology, secure payment systems, and personalized shopping experiences powered by data analytics. In 2024, retail e-commerce sales are estimated to exceed an impressive 4.1 trillion U.S. dollars worldwide, and this figure is expected to reach even greater heights in the coming years. With innovations such as same-day delivery, augmented reality shopping tools, and seamless payment options, the future of e-commerce promises to be more dynamic and consumer-focused than ever before.

The rapid expansion of e-commerce continues to create lucrative opportunities for businesses worldwide. However, this growth also attracts increasingly sophisticated fraudsters, leading to a surge in e-commerce fraud. In 2025, global e-commerce fraud is expected to reach unprecedented levels, threatening businesses’ financial stability and consumer trust.

Key fraud trends anticipated in 2025 include:

The Veriff Fraud Report 2025 highlights several fraud trends that will shape the e-commerce landscape next year:

• Synthetic Identity fraud – AI-generated identities that bypass traditional verification methods.
• Phishing and social engineering – Manipulative schemes designed to steal sensitive credentials.
• Account Takeovers (ATOs) – Unauthorized access to user accounts leading to fraudulent transactions.
• Real-time payment fraud – Exploiting instant payment systems for quick fund transfers before detection.
• Refund and chargeback fraud – Abusing return policies to claim illegitimate refunds.

In 2024, refund/policy abuse was the most common type of fraud experienced by just under half of online merchants worldwide. First-party misuse (also known as “friendly fraud”) affected another 45 percent of merchants. Both refund/policy abuse and first-party misuse occur post-purchase, so unlike phishing or card testing, are not attacks that can be stopped in real-time, making them more difficult for online merchants to manage.

Understanding e-commerce fraud

Definition and impact on businesses

E-commerce fraud refers to the unauthorized use of sensitive customer data, such as credit card information, to fraudulent transactions or gain unauthorized access to online accounts. This type of fraud can have a significant impact on businesses, resulting in financial losses, damage to reputation, and erosion of customer trust. According to recent studies, e-commerce businesses worldwide lose billions of dollars each year to various types of fraud, including identity theft, credit card fraud, and chargeback fraud.

The financial repercussions of e-commerce fraud are substantial, often leading to increased operational costs, as businesses invest in more robust security measures. Additionally, the damage to a company’s reputation can be long-lasting, as customers may lose trust in the brand’s ability to protect their sensitive data. This erosion of trust can result in decreased customer loyalty and a decline in sales, further impacting the business’s bottom line.

Types of e-commerce fraud

E-commerce fraud can take many forms, including:

• Transaction fraud: This type of fraud occurs when malicious actors use stolen credit card information to make unauthorized purchases. It often leads to significant financial losses for businesses and can lead to chargebacks.
• Chargeback fraud: This type of fraud occurs 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 affects the merchant’s chargeback ratio.
• Return fraud: This type of fraud occurs when customers exploit online stores’ return policies by purchasing items with the intention of returning them, or by returning used or damaged items. This can lead to inventory losses and increased operational costs.
• Account takeover fraud: This type of fraud occurs when unauthorized parties gain access to a user’s account and make unauthorized purchases or changes. It often involves the use of stolen credentials from data breaches.
• Refund fraud: This type of fraud occurs when fraudulent actors pose as customers and request refunds for products or services they never purchased. This can be particularly challenging to detect and prevent, leading to revenue losses.

Emerging e-commerce fraud trends for 2025

Key fraudulent transactions risks impacting global e-commerce businesses

• Synthetic identity fraud – Fraudsters leverage AI-generated personas to bypass traditional identity verification, making it difficult to distinguish real from fake users.
• Phishing & social engineering – Cybercriminals manipulate individuals and businesses to reveal confidential data, leading to financial losses and data breaches.
• Account Takeovers (ATOs) – Using stolen credentials from data breaches, hackers gain unauthorized access to user accounts, making fraudulent purchases.
• Real-time payment fraud – Faster payment systems provide less time for fraud detection, making businesses vulnerable to immediate financial losses.
• Refund & chargeback fraud – Fraudsters manipulate refund policies to obtain unauthorized reimbursements, leading to revenue losses for e-commerce platforms.
• Promo and loyalty fraud – Fraudsters create multiple accounts to abuse promotional offers and exploit loyalty reward programs.
• AI-powered deepfake scams – Fraudsters use AI-generated deepfake videos and voice cloning to impersonate individuals, leading to sophisticated fraud schemes.
• Surge in holiday shopping fraud – Fraud rates spike during high shopping seasons like Black Friday and Cyber Monday, with fraudulent transactions increasing by 22%.
• Impersonation fraud – In 2024, impersonation fraud accounted for 82% of all fraud cases, significantly impacting e-commerce businesses.
• Financial impact on e-commerce – E-commerce platforms faced $48 billion in fraud-related losses in 2023, with an expectation for higher figures in 2025.
  
  Implementing effective e-commerce fraud prevention strategies is crucial to mitigate these risks. Balancing fraud prevention with a seamless user experience remains a challenge. Businesses must deploy robust security measures while ensuring minimal friction for legitimate customers.

Actionable insights: Protecting your e-commerce business

Practical strategies for fraud prevention

• Identifying red flags – Monitor for suspicious transaction patterns and unusual behavioral anomalies.
• Strengthening decurity – Implement advanced fraud detection solutions like real-time verification, biometric authentication, and device fingerprinting.
• Employee yraining – Educate staff on recognizing and mitigating fraud attempts.

Regulatory compliance best practices

• Adhering to global frameworks – Ensure compliance with relevant applicable regulations.
• Secure data handling – Maintain robust data protection measures to safeguard customer information.
• Leveraging Identity Verification Solutions – Use AI-driven verification to prevent non-compliant transactions and fraudulent activities.

Regional fraud trends & compliance: US vs UK

US market

Fraud challenges: As online shopping continues to grow, the US market is facing an increase in fraud-related issues. Refund fraud, where customers falsely claim refunds for items they never returned, is becoming more prevalent. Account takeover (ATO) fraud, where fraudsters gain unauthorized access to user accounts, poses additional risks by exploiting personal data. Instant payment fraud, fueled by the rise of digital wallets and peer-to-peer payment systems, also remains a significant challenge.

Key regulations: To address these issues, the US financial market operates under several key regulations, including the Bank Secrecy Act (BSA), which focuses on preventing money laundering, tax matters are handled by IRS guiding the compliance for financial reporting and transparency, and FinCEN AML rules aimed at combating fraud and other financial crimes.

UK market

Fraud challenges: The UK market faces its own set of fraud-related challenges. VAT refund fraud, where individuals or businesses falsely claim VAT refunds, continues to be a concern. Phishing scams targeting individuals through deceptive emails and messages are on the rise, often leading to data theft. Additionally, data breaches pose a serious threat to both businesses and consumers, as stolen information can be used for fraudulent activities.

Key regulations: The UK has implemented several important regulations to mitigate these risks. The UK GDPR strives to ensure that all businesses handling personal data adhere to strict data protection standards, safeguarding personal and financial information. The Financial Conduct Authority (FCA) guidelines emphasize transparency and fair practices for the financial services sector.

How Veriff helps prevent e-commerce fraud

AI-powered fraud prevention solutions

• Biometric Authentication – Enhances security with facial recognition, adding an additional layer to multi-factor authentication (MFA).
• Promotion abuse prevention – Detects users attempting to create multiple accounts for fraudulent promotions.
• Fraud detection algorithms – Uses machine learning to detect and prevent fraudulent transactions before they occur.
• Enhanced user experience – Minimizes false positives, ensuring a smooth onboarding process while maintaining security.
• Comprehensive data analysis – Examines IP addresses and device data to flag suspicious activities.

By leveraging Veriff’s AI-driven fraud prevention solutions, e-commerce businesses can safeguard transactions, protect customer trust, and ensure global regulatory compliance.

Case Study: Chicks Gold

Veriff has partnered with Chicks Gold, an e-commerce platform specializing in in-game currencies and digital assets, to enhance user onboarding and bolster security. Established in 2014, Chicks Gold is committed to connecting gamers worldwide by offering premium services at competitive prices. To ensure customer safety and comply with Know Your Customer (KYC) regulations, Chicks Gold has integrated Veriff's identity verification solutions into its platform. This collaboration aims to protect against fraud and provide a secure environment for transactions. According to Austin Shave, CFO at Chicks Gold, the partnership has significantly improved their processes, leading to increased customer satisfaction and safety. 

As a high-risk digital asset trading platform, Chicks Gold relies on Veriff’s robust identity verification solutions to:

• Prevent fraud and unauthorized transactions.
• Ensure compliance with KYC (Know Your Customer) regulations.
• Safeguard users against identity theft and financial scams.

FAQs: Addressing key e-commerce fraud concerns

1. What are the biggest e-commerce fraud risks in 2025?

The most critical threats include synthetic identity fraud, phishing scams, ATOs, and real-time payment fraud.

2. How can businesses prevent fraud without harming customer experience?

Frictionless identity verification and AI-driven fraud detection provide seamless onboarding while maintaining high security standards.

3. How does Veriff’s technology stop fraudsters?

Veriff employs AI, biometrics, and machine learning to detect fake identities, analyze suspicious behavior, and prevent unauthorized transactions.

4. What regulations should e-commerce businesses follow?

E-commerce businesses must comply with relevant applicable regulations.

By staying ahead of emerging fraud threats and leveraging Veriff’s AI-powered fraud detection solutions, e-commerce businesses can minimize risk, protect customers, and enhance regulatory compliance in 2025 and beyond.