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Online fraud is no longer just a technical challenge ā itās a financial crisis. According to the latest Global Fraud Trends 2025 report from Ravelin, digital merchants lost an average of nearly \$11 million each to fraud last year. What’s especially alarming is the rapid rise of first-party fraud, where everyday consumers are now some of the biggest culprits. With marketplaces, digital goods, retail, and hospitality sectors all under siege, fraud is becoming more sophisticated and harder to detect ā especially as businesses walk a tightrope between customer loyalty and risk management.
This article breaks down the key insights from the report, highlights the evolving threat landscape, and analyzes why businesses must rethink their fraud strategies in 2025 and beyond.
Global Fraud Explosion:
Ravelin’s in-depth survey of 1,466 fraud and payment professionals across the globe has confirmed what many online merchants feared: fraud is rising fast, and itās no longer driven only by organized cybercrime groups. Now, everyday consumers are fueling the fire.
\$11 million lost per online merchant on average last year due to fraud.
77% of respondents reported an increase in fraud volumes.
64% expect the trend to worsen over the next year.
47% believe consumers are more willing than ever to commit fraud.
The most common type is chargeback fraud, often referred to as friendly fraud, where a legitimate purchase is later disputed under false pretenses. In addition, refund abuse is on the rise, with customers falsely claiming damage or non-delivery to receive refunds.
While card-not-present (CNP) fraud remains the most expensive, chargeback fraud and refund abuse are catching up quickly. Over half of all merchants saw a year-on-year increase in refund scams, and 55% expect that number to climb further in the year ahead.
Thereās a growing consensus that legitimate customers can be just as damaging as professional fraudsters. But businesses remain hesitant to act, fearing it might impact brand loyalty and customer satisfaction. In fact, 66% of merchants prioritize their image over cracking down on fraud, and 76% admit they feel pressured to refund customers even when abuse is suspected.
Ravelin CEO Martin Sweeney argues that this reactive stance is dangerous. With the right fraud detection tools, he believes retailers can accurately distinguish fraudsters from genuine buyers ā preserving customer experience without enabling bad behavior.
Supporting these findings, LexisNexis reports that 51% of UK fraud cases now involve first-party fraud, a shocking 33% rise over the previous year. Globally, this type of fraud now accounts for 36% of all fraud cases. Factors like inflation, economic instability, and the growing popularity of Buy Now, Pay Later platforms are contributing to this worrying shift.
LexisNexis emphasizes that traditional fraud prevention methods are ill-suited for this trend. Since first-party fraud is often masked by seemingly legitimate behavior, it requires advanced behavioral analytics and identity modeling to detect and prevent.
What Undercode Say:
The transformation of fraud into a consumer-driven phenomenon marks a turning point for e-commerce. For years, fraud was an external threat ā a matter of cybersecurity, not customer service. Today, the enemy could be your most frequent buyer. That requires a paradigm shift in how companies approach fraud detection, customer engagement, and overall risk assessment.
Businesses have become too accommodating in the face of abuse. By prioritizing customer loyalty at all costs, many are creating an environment where fraud can thrive unchecked. While refund policies and flexible returns help drive sales, they are also open invitations for exploitation.
Thereās also a psychological layer to this trend. With economic pressure mounting worldwide, consumers may rationalize fraudulent behavior as harmless or justified. It’s not just about bad actors anymore ā itās about desperate or opportunistic customers blurring ethical lines.
The surge in Buy Now, Pay Later fraud shows how innovation can unintentionally create new fraud vectors. BNPL services, while popular, lack the stringent verification layers found in traditional banking, making them easy targets for manipulation.
So what should businesses do?
- Invest in AI-driven behavioral fraud detection. Old models focused on stolen credentials and blacklists wonāt work against someone using their own identity to commit fraud.
Rebalance the customer service-fraud prevention equation. You donāt need to alienate customers to enforce smarter safeguards.
Train teams to spot patterns in refund abuse and false claims. Data should be your ally, not just your audit trail.
Segment customers based on risk, not just purchase history. Someone making regular purchases isn’t necessarily low-risk anymore.
Collaborate across sectors. Marketplaces, retailers, travel, and financial institutions need to share fraud intelligence to stay ahead of shifting tactics.
In the long run, the companies that survive this new fraud frontier will be the ones who realize that consumer-driven fraud demands a fresh strategy ā one that protects profits without compromising on trust.
Fact Checker Results: ā
Confirmed: Over 77% of global merchants saw fraud increase in the past year.
Verified: First-party fraud accounts for 51% of UK fraud cases, up 33% year-over-year.
Trusted: Card-not-present fraud remains the most costly, followed closely by chargebacks and refund abuse. ššš³
Prediction:
As the economic squeeze continues, first-party fraud will likely dominate the fraud landscape through 2026. We anticipate that more companies will implement AI-powered fraud tools that balance user experience with real-time risk scoring. Regulations may also evolve to hold consumers more accountable, especially in high-risk sectors like BNPL and digital marketplaces. Companies that fail to adapt will see profit erosion, reputational damage, and increased scrutiny from both financial partners and regulators.
References:
Reported By: www.infosecurity-magazine.com
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