Retailers face surge in AI-driven refund fraud and fake damage claim scams

Retailers are experiencing a sharp rise in AI-powered refund fraud, as shoppers and organised crime groups increasingly use generative AI tools to fabricate convincing return claims and exploit flexible retail policies.

According to new research from digital trust and fraud prevention platform Forter, AI-generated damage claims have become the fastest-growing form of return abuse. Fraudsters are now using widely available AI tools to create realistic fake evidence, including altered receipts, doctored images of damaged goods, and fabricated “item not received” narratives.

Forter warned that some coordinated fraud networks are scaling operations through “returns-as-a-service” models, where organised groups assist individuals in submitting fraudulent claims in exchange for a share of the profits. These tactics are evolving faster than many legacy fraud detection systems can respond.

Fashion retailers are particularly exposed due to high natural return rates, which already place pressure on margins and logistics. The data also shows that 53% of merchants report issues with “wardrobing”, where customers wear clothing before returning it, while 30% of consumers admit to ordering extra items to meet free shipping thresholds and later returning them.

Overall, 44% of UK businesses say they are already affected by refund and returns abuse, with nearly half of retail leaders warning that the issue has become severe enough to consider scaling back operations or closing entirely.

Forter said the rise of generative AI is accelerating the sophistication and scale of fraud attempts, turning returns into a critical vulnerability in modern retail operations.…Read more by