Online merchants hit by double whammy of fraud as cost of living bites

  • New research from Ravelin charts the rise of the ‘criminal customer’, now the ‘number one risk factor’ for one in three online businesses
  • The research also shows a marked growth in sophisticated & organised criminal fraud
  • Chief Financial Officers (CFOs) and Chief Risk Officers (CROs)now have to navigate an increasingly complex fraud landscape
  • New forms of payment amplify dispute resolution issues for merchants
  • Online businesses are being hit by a damaging double-whammy of fraud as the cost of living crisis bites.

A survey of chief financial officers (CFOs) at online merchants across 10 countries, commissioned by fraud prevention platform Ravelin has found fraud is on the increase across the board in areas including:

  • Online payment fraud (54%)
  • Account takeover (50%)
  • Returns and refunds abuse (52%)
  • Promotions abuse (52%)

The study shows fraud remains a significant source of profit erosion for businesses trading online.  Payments fraud remains the number one business risk for respondents, followed by friendly fraud, account takeover, and policy abuse.

As a result, finance leaders overwhelmingly expect their fraud teams to grow over the coming months – with a third of respondents agreeing their teams could grow by 20 percent or more.

Entrepreneurial fraudsters

The CFOs and CROs surveyed say the rise of the criminal customer and of professional organised fraudsters has increased quite dramatically over the last 12 months.  Fifty-seven percent of CFOs polled agreed they are seeing increased evidence of sophisticated ‘fraud as a service’.  These schemes involve organised groups buying items using stolen card details, reselling them to customers who are often unaware of their involvement in criminal activity.

‘Criminal customers’

The survey finds that merchants’ own customers are almost as likely to commit fraud as organised criminals.  Indeed, over a third of finance leaders describe first party frauds including “friendly fraud”, returns, and promotions abuse as the number one risk factor facing their business.  The high levels of “friendly fraud”, promotions, and policy abuse, possibly accentuated by the cost of living crisis, mark the rise of the “criminal customer”.

The trend seems particularly pronounced among younger age groups.  A separate study by fraud agency CIFAS found one in 13 people admitted to involvement in some form of first-party fraud – rising to one in seven among digitally-savvy 16-34 year olds.

Novel forms of payment harder to challenge

The data also highlights the challenges of fraud relating to buy now pay later (BNPL) schemes and other novel forms of payment.

While debit (63% of respondents) and credit cards (68%) remain the most common vectors for card fraud, they  are the easiest for merchants to successfully challenge in fraud disputes.

On the other hand, methods such as Apple Pay, Google Pay, and BNPL schemes like Klarna are more likely to represent a headache for online merchants regarding dispute resolution. Just five percent of respondents agree they have had success challenging BNPL payment disputes.

Ravelin CEO Martin Sweeney, said: “CFOs at online businesses, who have overall responsibility for fraud, tell us  fraud from organised criminals remains a perpetual thorn in their side.  But fraud by their own customers runs close behind.   They recognise the vast majority of internet shoppers are scrupulously honest, but recognise they need to be increasingly vigilant for those who are not.

“However, we find that the stock response to growing fraud is to throw more money and resources at it: bigger fraud teams, more processes. This is unsustainable: fraud will continue to grow and mutate, customers will become more demanding, losses will continue to grow.

“CFOs need to get on the front foot managing fraud: using automation to nip fraudulent transactions in the bud, while freeing up their expert human investigators to help minimise profit erosion, inform product development, and help grow the business.”

To read more about the findings, download Ravelin’s report, “Fraud in a short-attention economy”.


Ravelin commissioned research provider Qualtrics to carry out an online survey of 1,900 e-commerce leaders from merchants across 10 countries, including CFOs, CTOs, Chief Risk Officers, and fraud and payments managers. Survey participants work for online merchant businesses with more than $50 million in annual revenue.