Ecommerce Fraud Management in the AI Era: A 2026 Guide

Every dollar of fraud costs US retailers $4.61, according to the 2025 LexisNexis “True Cost of Fraud” study, and the number has climbed 32% since 2022.

The extra $3.61 on top of each stolen dollar comes from things like chargeback fees, manual review labor, operational drag, and reputation damage. 

In Veriff's “Fraud Industry Pulse Survey 2026” 74% of respondents reported an increase in online fraud over the previous year. Additionally, 85% said fraud hurt revenue, and 75% specifically cited more AI-driven fraud attacks—with 78% expecting the threat to grow further in 2026.

Ahead, learn what ecommerce fraud looks like today, and how to build a fraud-management strategy that holds up against it.

What is ecommerce fraud management?

Ecommerce fraud management refers to any system ecommerce retailers operate to detect, review, and respond to fraud and attempts at fraud across every stage of the transaction lifecycle—and, most importantly, to prevent those attempts from succeeding. This strategy should include everything from account creation and checkout to fulfillment, chargebacks, and returns. 

Fraud prevention and fraud management are not identical, though fraud management starts with fraud prevention. A solid ecommerce fraud prevention strategy covers detection logic, authentication, order review, dispute handling, policy abuse response, and the continuous tuning that keeps all of it working against threats that change weekly. 

A comprehensive fraud management strategy also accounts for the fact that no fraud prevention strategy will be 100% foolproof, and adds steps for mitigating the costs of fraud events, handling them as a business reality rather than a security failure. 

At all of these stages, your choice of ecommerce platform can make a difference. Shopify's built-in fraud solutions cover three layers:

1. Prevention stops fraud before it happens. Custom rules in Shopify Flow, 3D Secure authentication, and card testing block fraud attempts at checkout. 
2. Fraud detection flags high-risk orders using analysis trained on more than 10 billion transactions across the network. Plus, built-in tools detect proxies trying to take over your account. 
3. Management covers what happens after with authorization optimization, automated dispute resolution, and allow/block lists you can tune by hand.

Why ecommerce fraud management is an operations problem

Zero fraud isn't a realistic goal, because you can easily hit zero fraud by rejecting every order that looks slightly off; but you also lose all of the revenue that comes with those orders. 

A working program balances fraud loss against approval rate, conversion, customer trust, and how much manual work your team can absorb.

That’s why fraud is best treated as an operations problem. 

The cost of false positives 

At Riskfield’s Ascend 2025 summit, 85% of businesses surveyed said their biggest challenge in balancing customer experience with fraud prevention was reducing friction for good customers without raising fraud risk.

Forty-seven percent of businesses estimated that up to 5% of their legitimate orders are falsely declined. Based on that percentage, Riskified estimated their respondents were turning away roughly $50 billion in legitimate revenue annually.

A false decline doesn’t just represent one lost sal. You already paid the acquisition cost—the ad spend, the retargeting, the email sequence that finally moved a shopper to checkout—and now you're writing it off. The customer is less likely to circle back after a rejected transaction they know was valid, so their lifetime value (LTV) walks out with them. Add to that potential reputational damage when customers share their frustrating experience online or with others.

The case for a shorter review queue

Shelfies, a custom-print ecommerce brand, used to lose thousands of dollars a year to high-risk orders their team couldn't cancel in time. Their manufacturers run across multiple time zones, so a fraudulent order placed overnight hit production before anyone woke up to stop it. 

Shelfies would absorb the entire production cost for custom inventory no one would ever buy, plus a $15 bank chargeback fee.

“If we don’t catch fraud quickly and a custom order is produced, we’re stuck with inventory we can’t sell,” founder Nicholas Montgomery says. “If we print a sweater with your face all over it, no one else is going to buy that. So it’s a big loss for us.”

“It was frustrating because we work with manufacturers in multiple time zones which made it difficult to cancel high-risk orders before production had started.”

Shopify Flow changed that.

“Shopify Flow does it automatically now which gives us peace of mind.”

Manual review scales the way payroll scales: linearly, with diminishing returns and rising error rates at volume. Shopify's fraud analysis scores every online card order automatically using AVS checks, CVV results, IP-location data, freight-forwarder ZIP codes, and behavioral patterns, and surfaces every signal on the order page. 

The ecommerce enterprise challenge

Between 2023 and 2024, about 55% of ecommerce retailers absorbed at least $10 million in annual fraud-related costs, and over 10% reported annual losses from fraud above $30 million.

At that scale, fraud needs to be combated on all fronts: things like approval rate, chargeback rate, and how many orders a human had to touch all need to be moving in the right direction.

That's the job Shopify Flow does, by allowing you to automate key fraud management workflows through a simple drag-and-drop interface.

Take Western-wear retailer W. Titley & Co., who built Shopify Flow workflows to hide out-of-stock products and flag high-risk orders as part of a broader automation push. Across the program, revenue grew 190%, with a 75% lift in return customer rate and a 13% bump in average order value (AOV). 

What are the biggest ecommerce fraud risks in 2026?

These are the five types of ecommerce fraud risk you need to fortify your business against:

Friendly fraud

The 2026 “LexisNexis Risk Solutions Global Cybercrime Report”, drawn from analysis of more than 116 billion online transactions, found that first-party fraud, in which customers defraud the businesses they buy from, remained the leading source of fraud globally for a second consecutive year, accounting for 38.3% of reported cases.

Friendly fraud covers customers who buy something legitimately, then dispute the charge with their bank rather than going through returns—sometimes deliberately, sometimes because they don't recognize the descriptor, sometimes because filing a chargeback is easier than emailing support. 

But whatever the motive, the chargeback lands on the retailer’s desk—your desk—the funds reverse, and the goods are typically long gone.

Kevin King, VP of credit risk at LexisNexis Risk Solutions, says in Ecommerce Times that friendly fraud is "the fastest-growing threat retailers do not see coming."

Shopify power-up: For businesses on Shopify, Shopify Protect is the direct line of defense in this category. Your eligible Shop Pay orders are covered against fraudulent and unrecognized chargebacks, with Shopify reimbursing the chargeback amount and the fee when coverage applies. 

Policy abuse and refund abuse

Refund and policy abuse is the fraud type that the largest share of retailers encounter. Where friendly fraud tops LexisNexis's charts by volume of cases, refund abuse tops the Merchant Risk Council's charts by reach, hitting more stores than any other category. 

The category covers what MRC calls "returns abuse": customers fraudulently claiming non-receipt, falsifying returns, altering receipts, reselling merchandise, or returning packages filled with unrelated objects like rocks or sand.

And returns abuse carries a high operational cost. The most recent “Retail Returns Landscape” report from the National Retail Federation and Happy Returns projected total US retail returns at $849.9 billion in 2025, with 19.3% of all online sales expected to come back. The report pegs 9% of those returns as fraudulent, which at this scale comes to tens of billions of dollars.

The consumer-side numbers explain why it's hard to stop. Ravelin's “State of Refund Abuse” 2026 report found that one in four shoppers admitted to abusing refund policies in the previous year, and 98% of them succeeded. 

In the same Ravelin survey, 65% of consumers said AI has made it easier to falsely claim refunds for items they already own. Shoppers now feed real product photos into tools like ChatGPT and Gemini to generate fake cracks, tears, stains, and damage, then submit the manipulated images as "proof" of a defective order.

As Jamie George, VP of account management and partnerships at Ravelin, said in a January 2026 analysis: "AI image and video editors fundamentally break this model by attacking its core assumption: that photographic evidence is authentic. Your eyes can no longer always be believed."

Shopify power-up: For the post-purchase side, Shopify Flow lets you build return-abuse workflows: tagging repeat returners, holding fulfillment on customers flagged for chargebacks in the last 60 days, and routing suspected abuse cases to a review queue instead of your default returns path.

Payment fraud

Recent research puts global ecommerce losses from online payment fraud at $56.1 billion in 2025, with forecasts climbing past $131 billion by 2030—more than doubling in five years. 

Real-time payment (RTP) is now the second-most widespread fraud type globally, affecting 45% of businesses per the Merchant Risk Council's 2025 report. MRC's 2026 report with Visa Acceptance Solutions shows 43% of retailers now accept RTP, with 79% of adopters reporting usage increased last year. 

With RTP, funds settle instantly, with no chargeback window, issuer review, or clawback path. Once it's gone, it's gone. 

In the Visa Acceptance/MRC 2026 survey, more than 80% of businesses said their biggest fraud challenge is technological infrastructure: the legacy systems and disconnected data that can't keep pace with automated, industrialized attacks.

Shopify power-up: Shopify Payments runs integrated card-testing protocols that reject automated low-dollar validation attempts before they generate a chargeback. 3D Secure adds a payment authentication layer to online card transactions when the risk signal warrants one, pushing liability for authenticated fraud back to the issuer. Finally, Shopify Protect covers eligible Shop Pay orders against fraudulent chargebacks, including the unauthorized-transaction category that lands hardest on payment fraud cases. 

Account takeover and identity-based fraud

In an account takeover (ATO) fraud, a fraudster takes over a real customer's account using credentials harvested through a data breach or phished login, or bought for pennies on the dark web, and places orders using saved payment methods and known shipping addresses. 

The transaction looks exactly like the customer's normal behavior, because it uses the customer's real account.

Veriff's “Identity Fraud Report 2026” found the net fraud rate across online marketplaces at 19.2%, nearly five times the global average of 4.18%, which itself translates to one in every 25 verification attempts being someone pretending to be someone else. 

Today, impersonation now accounts for 85% of all fraud attempts Veriff intercepts, and digitally presented media was 300% more likely to be AI-generated or altered compared to the year before.

The consumer-side data matches. Pew Research Center's July 2025 survey found 29% of US adults have had a social media, email, or bank account hacked, while 48% have had fraudulent charges made on their credit or debit card. Among those hit, 21% lost money to an online scam or attack.

Shopify power-up: Shopify's customer accounts support passwordless login with one-time verification codes, removing the attack surface of reusable credentials entirely. Shopify Flow lets you build account-takeover defenses on top of that: auto-tagging customers who change shipping addresses within minutes of login, holding fulfillment on orders where the payment method was added less than an hour before checkout, or routing sessions with unusual device/IP combinations to manual review.

Agentic fraud

Most of the fraud categories we’ve looked at so far assume the buyer is a human, but agentic fraud fractures that supposition. Just as AI agents now browse, compare, and check out on behalf of customers, fraudsters use the same technology to browse, compare, and check out on behalf of no one at all.

The scale is already here: 95% of retailers have implemented or plan to implement agentic AI, and 70% of customers say they're comfortable letting AI agents make purchases for them, according to Deloitte.

Retailers with a “meaningful volume” of AI-referred orders saw a 37% increase in fraudulent traffic between Q2 and Q3 of 2025, and 69% of retailers experienced AI-enabled fraud in the past year. 

While 87% expect the problem to grow, only 3% feel well prepared to address it. 

The response infrastructure is emerging. In January 2026, Google announced the Universal Commerce Protocol at NRF's Big Show: an open-source standard for agentic commerce developed in partnership with Shopify, Etsy, Wayfair, Target, and Walmart, and endorsed by more than 20 retailers, payment providers, and tech platforms.

Shopify power-up: Shopify is one of the leading platforms actively building the rails that agentic commerce runs on. In December 2025, Shopify launched Agentic Storefronts as part of our Winter '26 release, giving retailers managed access to ChatGPT, Microsoft Copilot, Google AI Mode, and Gemini from a single admin. On the infrastructure side, we codeveloped the Universal Commerce Protocol with Google and ship UCP-compliant Catalog and Checkout MCP servers for agentic apps to authenticate, search the catalog, and refer buyers to checkout with attribution intact.

How to build an ecommerce fraud management strategy 

Follow these steps to create an ecommerce fraud management strategy to protect your business:

1. Set risk thresholds and review rules
2. Add authentication where risk is highest
3. Automate low-risk and high-risk decisions
4. Create a chargeback response process
5. Monitor performance and adapt to new fraud patterns

1. Set risk thresholds and review rules

First, your fraud management strategy needs a decision framework: which orders auto-approve, which auto-decline, which go to manual review, and at what transaction value those lines move.

If parameters are too loose, fraud costs compound. If they’re too strict, false declines cost more than the fraud itself, and drive customers away. An Experian 2026 fraud report conducted with Forrester Consulting found that 70% of ecommerce retailers still rely on manual reviews to resolve fraud alerts, and 35% of fraud teams take a week or more to complete one. At that pace, the cost of reviewing orders by hand outruns the value of the fraud caught. 

The queue is a threshold problem.

Here are the practical benchmarks to size it against:

• Ravelin's guidance says that if your business has a 1% rate of chargeback fraud and doesn't automatically decline any orders, you shouldn't be reviewing more than 2% of your transactions.
• Signifyd adds a second benchmark: If your review-to-decline rate falls below 10%, meaning fewer than 1 in 10 manually reviewed orders gets declined, your automation threshold is set too cautiously.

In January 2025, Shopify Payments launched a machine-learning (ML)-based preauthorization model that intelligently routes transactions through 3D Secure based on real-time risk signals instead of blanket rules. Here are the results across the Shopify Payments retailer base:

• An increase in 26 basis points in payment success rates, equivalent to $471 million in recovered annual revenue
• A 20% reduction in fraud chargebacks, representing $62 million in direct retailer savings, or as much as $273 million when factoring in the full downstream cost of disputes

The lesson Shopify engineers drew from the data was that traditional AVS checks have become a liability in modern commerce. Their own analysis showed that moving beyond rigid AVS controls let Shopify businesses process 0.33% more transactions without raising fraud exposure, because card issuers had already approved those transactions before AVS entered the picture.

“Our 3DS implementation affects both revenue streams: it increases top-line revenue through higher approval rates while protecting margins through fraud reduction,” writes Frans van Coller, senior product manager at Shopify.

Tip: For retailers who'd rather not staff a fraud operations team to tune these thresholds in-house, Signifyd's app in the Shopify App Store is a Shopify Plus Certified integration that automates the decision layer. The guaranteed fraud protection model makes instant approve/decline calls at checkout and backs approved orders with a financial guarantee against fraud chargebacks, effectively shifting liability off the retailer and eliminating the manual review queue for orders the model can decide on its own.

2. Add authentication where risk is highest

Not every customer action needs the same level of verification, and not every customer should need to prove who they are on every login.

According to Ravelin's “Global Payments Report 2026”, 78% of retailers are now using 3D Secure exemptions, up from 72% the year before. 

As Ravelin's COO and cofounder Mairtin O'Riada writes: "Verifiable, secure, user-controlled tokens are replacing static, vulnerable credentials. Authentication is becoming more dynamic."

The urgency behind the shift is in the breach data. Verizon's “2026 Data Breach Investigations Report” found 88% of basic web application breaches involve stolen customer login credentials, and 14% of incidents now involve capitalizing on multi-factor authentication (MFA) fatigue, where attackers spam repeated push notifications until a user absentmindedly approves one.

Here’s where to add “good friction”:

• Add verification only when risk increases. A login from a new device, an unusual order value, a change to shipping or payment details, multiple failed login attempts, or impossible travel between locations. 
• Apply step-up authentication to address and payment method changes. This includes unusually large orders, gift card and loyalty balance redemptions, and logins after suspicious activity.
• Account recovery—password resets, contact-detail changes, support-assisted access—is the path attackers target when login is locked down. Verify recovery with the same scrutiny with which you'd verify a login.

Princess Polly, for example, tested Shop Pay's authenticated checkout, which identifies returning customers with an active Shop Pay session and prefills their information at checkout. 

In four weeks, the apparel retailer recorded a 4.1% higher conversion rate among buyers with an existing Shop Pay session, a 1.6% increase in total US orders, and a 7.6% reduction in checkout completion time.

“The familiarity and trust our customers have with Shop Pay added another layer of comfort, enhancing the overall speed and frictionless experience of the checkout process,” says Melanie Huang, ecommerce manager.

Read more: Customer Authentication Best Practices for Shopify Stores (2026)

3. Automate low-risk and high-risk decisions

The orders at either end of the risk spectrum don’t need to touch a human. Low-risk orders should ship, and very high-risk orders should be canceled and refunded. 

Your analysts' time belongs to the middle: the genuinely ambiguous transactions where human judgment adds value.

Take Maine Lobster Now, a direct-to-consumer (DTC) gourmet seafood business that ships fresh Maine lobsters to doorsteps across North America. Before moving to Shopify, founder and CEO Julian Klenda's team was on Magento, and fraud management was almost entirely manual. 

"We used to have folders on the wall for each day where we'd put the orders," Klenda says. "Nothing was automated." One team member's full-time job was flagging large orders and calling customers to verify they were real.

After the move to Shopify:

• Chargebacks from fraud fell from 0.25% to 0.025% of total transactions, a stunning 93% reduction.
• The overall conversion rose 69%, and 97% on mobile.
• Shopify's store cost them roughly 90% less to build than their Magento store.
• The team member whose whole job had been fraud review was redeployed to improving customer experience.

“Now that we're on Shop Pay, it's so easy on our end to identify fraud. [Fraudsters] are blocked entirely,” says Julian Klend, founder and CEO.

Learn how Shopify handles high-risk orders with Shopify Flow.

4. Create a chargeback response process

Once a chargeback is filed, the clock starts. Most card issuer deadlines give businesses a response window of 15 to 30 days to submit evidence, but some run as tight as seven.

The data suggests most retailers aren't fighting back hard enough. Mastercard's 2025 chargebacks report found that businesses win an average of 50% of the representments they submit—54% in the US. But only 11% of large enterprises with over $2 billion in revenue represent more than 50% of the chargebacks they receive. The rest of the volume is being written off without a fight.

A working response process has five stages:

• Intake: Every chargeback notification needs to land in a single place within hours; card issuers send the dispute to your payment processor, which notifies you. On Shopify Payments, this appears in the admin's disputes queue with the reason code and deadline attached.
• Triage: Not every chargeback should be fought. A legitimate complaint, like damaged goods or a duplicate charge, should be refunded voluntarily and closed. 
• Evidence assembly: For first-party fraud disputes under Visa reason code 10.4, Compelling Evidence 3.0 is the standard: two prior undisputed transactions from the same cardholder with matching device ID, IP, shipping address, or account login will shift liability back to the issuer.
• Submission: Representments go through the payment processor to the issuer. On Shopify Payments, automatic dispute resolution assembles and submits the packet for you—transaction records, customer history, tracking data, AVS and CVV match codes—with Visa and Mastercard rule compliance built in. You don't have to assemble the packet manually.
• Track the outcome and feed it back: Win rate by reason code, win rate by product category, win rate by customer segment—every representation gives you data.

For businesses that want the financial guarantee on top of the response automation, Shopify Protect covers eligible US Shop Pay orders by absorbing qualifying fraud chargebacks entirely. So Shopify takes the loss, not you. 

Orders need to be fulfilled within seven days and include carrier tracking to qualify. This doesn't eliminate the need for a response process on non-Shop Pay transactions, but it doestake a meaningful slice of the volume off your plate.

Read more: 9 Ways to Prevent Chargebacks for Your Business

5. Monitor performance and adapt to new fraud patterns

The fraud you managed last year isn't the fraud you're managing now. 

For example, in November 2025, TikTok Shop's head of governance, Nicolas Waldmann, told Business Insider that generative AI has become "a powerful new tool for fraudsters." Scammers can use it to spin up entire fake brands overnight to take payment and disappear. 

"It's organized crime, to be honest," Nicolas said. 

In the first half of 2025 alone, the platform rejected 1.4 million seller applications, blocked 70 million products before listing, and removed 700,000 sellers for policy violations.

TikTok Shop is an extreme case, but the shape of the threat isn't unique to them:

• First-party fraud jumped from 15% of reported fraud in 2023 to 36% in 2024. 
• Sumsub's 2025–2026 identity fraud report, based on more than 4 million fraud attempts, found that while the overall identity fraud rate dipped slightly from 2.6% to 2.2%, high-quality attacks rose 180% year over year.
• Agentic fraud has Palo Alto Networks' Unit 42 documenting live attack patterns against retailers—things like payload poisoning in gift cards, logic hijacking in returns flows, and scripted refund chains that look like customer service.

Here are four metrics that can tell you whether your fraud system is healthy:

• Chargeback rate: Your chargebacks divided by total transactions should stay under 0.65% to keep you out of monitoring programs. Over 0.9% puts you in Visa's Acquirer Monitoring Program (VAMP), which triggers fees and scrutiny. 
• False decline rate: This captures the legitimate orders your system rejected.
• Representment win rate: This needs to be tracked by reason code, not in aggregate.
• Manual review queue volume: If it's climbing, it's a signal that your automation rules are drifting out of calibration with your order mix.

Shopify surfaces your chargeback rate natively in Analytics, with a dedicated reporting view that was updated in January 2026 to include disputes resolved through Visa's Rapid Dispute Resolution program—a change specifically aimed at helping businesses track their true exposure for VAMP remediation. 

Further, Sidekick Pulse, launched in December 2025, runs continuously against store-specific signals and Shopify-wide pattern data, flagging anomalies proactively, like a chargeback spike in a product category, or a conversion drop that correlates with a 3DS rollout. 

Sidekick can also build and modify Flow workflows from natural language prompts. When a new fraud pattern shows up, you describe the rule, and Sidekick drafts the workflow for your team to review and deploy.