AI vs. Merchants: Are cybercriminals winning the fraud battle?

By Gloria Methri

Nearly half of online merchants fear an impending surge in AI-driven fraud, with 64% reporting they have already been targeted by cybercriminals leveraging artificial intelligence, according to a new report from Ravelin.

The AI vs AI report highlights a growing concern among retailers, travel companies, digital goods providers, and marketplaces. 91% are worried about AI being weaponised for fraudulent activities. The anticipated impact is severe, with 51% of businesses concerned that AI fraud will stall company growth and 39% fearing revenue losses.

AI Fraud Tactics on the Rise

Fraudsters are increasingly using AI tools such as Large Language Models (LLMs) to craft sophisticated phishing attacks, synthetic identities to create fake accounts at scale, and voice cloning to deceive businesses and customers alike. These advanced fraud techniques make it more complex than ever for merchants to differentiate between legitimate customers and bad actors.

“AI isn’t a magic ‘help me be a fraudster’ button,” said Ravelin CEO Martin Sweeney. “Rather, it enhances the efficiency of criminals already engaged in fraud. Our focus is on continuous improvements to fraud prevention strategies to stay ahead.”

Merchants Rely on AI to Combat AI-Driven Fraud

To counteract the rising threat, businesses are ramping up their use of AI-powered fraud prevention tools. The report reveals that 71% of merchants already leverage machine learning, LLMs, and other AI-driven technologies to detect and prevent fraudulent activities.

Merchants expect AI-enabled fraud to have the most significant impact on:

• Online payment fraud (53%)
• Fraudulent chargebacks (46%)
• Account takeovers (42%)

A Multi-Layered Approach to AI Fraud Prevention

With AI-powered fraud evolving rapidly, Ravelin’s report underscores the need for a multi-layered security approach that combines AI-driven fraud prevention with human expertise. Ravelin’s AI-native fraud prevention solutions aim to help businesses secure transactions while optimising payments. Key features include:

• Bespoke machine learning models that analyse unique merchant data in real time to block fraud.
• Automated fraud prevention to reduce operational burden and improve accuracy.
• Natural Language Processing (NLP) to enhance fraud detection of non-numerical data.
• AI rule creator, enabling fraud teams to generate fraud rules using natural language commands in any language.

As AI-powered fraud techniques become more sophisticated, businesses must take proactive measures to safeguard their operations. Ravelin’s report highlights the urgent need for merchants to integrate advanced AI fraud detection tools to stay ahead in the fight against cybercrime.