Fashion retailers experiencing surge in fraud during pandemic, research finds

Online fraud has significantly increased in the fashion industry in during the COVID-19 pandemic due to imposed lockdowns and the growth in the need for ecommerce, research by fraud detection and payment acceptance specialist Ravelin has revealed.

Nearly a third (32%) of fashion retailers have experienced a rise in online payment fraud over the past 12 months, while nearly half (44%) have experienced a rise in account takeover and promotion abuse.

In addition, 38% have experienced a rise in friendly fraud, while more than half (54%) have seen a rise in refund abuse — more than any other type of retailer. Experts argue much of this increase is driven by “wardrobing”, where consumers purchase clothing for the purpose of taking photos for social media, before returning items.

Ravelin’s findings come from a new report which draws on the opinions and experiences of 1,000 fraud and payments professionals working in large online retail businesses all over the world.

Mairtin O’Riada, Co-founder and CIO at Ravelin said: “The conditions of the pandemic have created a veritable petri dish for the growth of fraud. Retailers are scrambling to drive ecommerce and are handling extremely high volumes of transactions online, while also trying to fulfil a growing number of online deliveries.

“Fraud teams within fashion brands have a job on their hands now to mitigate the threat of fraud to protect profit margins. The only way to do that effectively is through machine learning-based technology. However, more fashion retailers use rules-based systems than any other type of retailer to combat fraud. Now’s the time to consider more sophisticated technology.”

Despite the rise in fraud over the past 12 months, nearly a quarter of fashions brands have a fraud team of five people or fewer — although three quarters of fashion brands are now expecting to increase their fraud team size and budgets.