The rapid evolution of artificial intelligence (AI) has created a double-edged sword for e-commerce businesses.
While AI-driven fraud prevention technologies continue to advance, fraudsters are also leveraging AI to launch more sophisticated and scalable attacks.
According to the latest AI vs AI report from fraud prevention firm Ravelin, the majority of merchants are bracing for an imminent surge in AI-powered fraud over the next 12 months.
The study, which surveyed retailers, travel companies, digital goods providers and online marketplaces, found that 91% of businesses are concerned about AI-enhanced cybercrime.
Meanwhile, 64% suspect they have already been targeted by fraudsters using AI-driven tactics.
The growing sophistication of AI-generated fraud threatens to impact company growth (51%) and revenue (39%), highlighting an urgent need for businesses to strengthen their fraud prevention strategies.
Using AI to Bypass Traditional Defences
The rise of generative AI and machine learning has provided cybercriminals with powerful new tools.
Among the most concerning developments is the use of:
- Large Language Models (LLMs) for phishing attacks – AI can generate highly convincing phishing emails, making it more difficult for recipients to distinguish between legitimate and fraudulent communications.
- Synthetic identities – Fraudsters can create entirely new digital identities using AI-powered image and document generators, allowing them to open fraudulent accounts at scale.
- Voice cloning technology – AI can mimic voices with near-perfect accuracy, making phone-based fraud (such as impersonation scams) increasingly difficult to detect.
These automated and scalable fraud techniques make it harder than ever for merchants to separate genuine customers from bad actors.
The Role of AI in Fraud Prevention
While AI is being weaponised by criminals, it is also proving to be a critical tool in the fight against fraud.
Nearly three-quarters (71%) of merchants surveyed are already using AI-driven fraud prevention tools, such as machine learning models, behavioural analysis, and natural language processing (NLP), to detect and prevent fraudulent activities.
Ravelin’s CEO, Martin Sweeney, underscores that while AI has enhanced fraudsters’ efficiency, it is not an unstoppable force.
“AI is part of a package of tools that help people become more efficient in perpetrating the crimes they already wanted to perpetrate,” Sweeney explains.
“There is no magic ‘help me be a really good fraudster’ button.”
Instead, he argues that fraud prevention teams must focus on continuous improvements in detection strategies, leveraging AI to stay ahead.
Key AI-Driven Fraud Prevention Strategies
To counter the rise of AI-powered fraud, businesses must adopt a multi-layered approach that combines AI-driven solutions with human expertise.
The most effective fraud prevention tools include:
- Bespoke machine learning models – Tailored fraud detection models trained on each merchant’s unique data, KPIs, and transaction patterns.
- Automated fraud prevention – AI-driven automation that streamlines fraud operations, reducing manual effort while improving accuracy.
- Multi-model integration – A combination of AI models that analyse hundreds of data points to enhance fraud detection accuracy.
- Natural Language Processing (NLP) – Advanced AI techniques that improve the ability to detect fraudulent messages and synthetic communications.
- AI-powered rule creation – Fraud managers can use AI to generate and test fraud prevention rules in real time, enhancing their ability to respond to evolving threats.
What This Means for Merchants in 2025
E-commerce merchants must take proactive steps to protect themselves from AI-driven fraud, as cybercriminals become more adept at leveraging AI for malicious purposes – according to the report.
Online payment fraud (53%), fraudulent chargebacks (46%), and account takeovers (42%) are expected to be the most impacted areas.
Businesses that fail to invest in advanced AI-driven fraud prevention solutions risk increased financial losses, reputational damage and regulatory scrutiny.
By adopting a multi-pronged AI strategy, companies can ensure they stay ahead in this escalating battle between AI-powered fraudsters and AI-driven fraud fighters.
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