Artificial Intelligence and Fraud in eCommerce

Artificial Intelligence and Fraud in eCommerce: Key Insights 

• Advanced Fraud Methods: Fraud rings are now using sophisticated techniques like fake accounts, custom software, and AI-generated deep fakes to manipulate customer service and carry out large-scale fraud.

• Holiday Fraud Surges: AI-driven bot fraud spikes during high-traffic shopping seasons, particularly in November, where 2023 saw a 137% increase as fraudsters took advantage of events like Black Friday and Cyber Monday.

• Evolving Fraud Prevention: To combat these rising threats, businesses are adopting machine learning to detect and block AI-powered fraud in real time, allowing them to better manage risks and safeguard customer trust.

Artificial intelligence (AI) is transforming both fraud and the fight against it, with the competition increasingly seen as AI versus AI. Fraudsters have adopted advanced AI techniques to carry out bot attacks, phishing scams, and credential stuffing, enabling them to automate massive fraud operations. 

These AI-powered bot attacks have surged by 140% during peak shopping seasons, according to Signifyd data. 

Heightened Fraudulent Activity in November 

Fraud rings, organized groups of criminals working together to commit large-scale fraud, are becoming increasingly sophisticated. Popular methods include creating fake accounts, writing custom software, and creating realistic phishing emails that are harder to detect. Deep fakes and AI-generated voices now mimic real customers, fooling customer service representatives into approving fraudulent transactions. 

Data shows the year-over-year change in AI-based bot-driven fraud attacks against retailers by month from 2022 to 2024:

• While most months in the data hover around 20-40% year-over-year change, high fraudulent activity is seen in November.

• The spikes in fraudulent activity, particularly in November, align with the peak shopping period driven by events like Black Friday and Cyber Monday.

• Retailers must remain vigilant during these peak periods, as the surge in attacks poses significant risks to both their revenue and reputation. 

Machine Learning in Fighting Against
AI-Powered Fraud 

On the other side, businesses are leveraging machine learning to protect themselves from these AI-driven fraud attacks. Machine learning is vital for detecting and preventing fraud at scale, helping merchants manage risks and maintain customer trust.

According to Xavi Sheikrojan, a fraud expert, machine learning is the first line of defense, capable of identifying and stopping fraud in real time.

Artificial Intelligence and Fraud
in eCommerce: Final Thoughts 

As AI continues to evolve, its role in conducting and combating fraud in eCommerce will only grow stronger. Over the next years, AI will likely become essential in identifying and preventing fraud at every stage, from returns management to payment processing. Fraud detection systems will become more sophisticated, utilizing real-time data and machine learning to stay ahead of evolving threats. 

As fraudsters refine their tactics, businesses will increasingly rely on AI to protect their platforms, reducing risks and improving customer trust in a rapidly advancing digital sector.

Sources: Signifyd, ECDB