Joy Agwunobi
The global eCommerce industry is facing an alarming escalation in fraud, as Artificial Intelligence (AI) drives increasingly sophisticated schemes that evade traditional security measures..
A recent study by Juniper Research projects that eCommerce fraud will rise dramatically to $107 billion by 2029, a 141 percent increase from $44.3 billion in 2024.
As AI becomes an increasingly indispensable weapon in the cybercriminal’s arsenal, businesses worldwide, including those in Nigeria’s rapidly expanding eCommerce market, are finding themselves on the front lines of an escalating battle against AI-driven fraud.
The report links the rise in eCommerce fraud to the increasing utilisation of AI by fraudsters, which has facilitated more sophisticated and large-scale attacks throughout the eCommerce ecosystem. It emphasises that AI, particularly through the generation of deepfakes, poses a considerable threat to online merchants by circumventing verification systems.
In addition, the findings raise concerns about the growing incidence of “friendly fraud,” where customers engage in fraudulent activities, such as refund scams, which further jeopardises merchants’ profitability.
“With rising levels of ‘friendly fraud’, where fraud is committed by the customer themselves, such as refund fraud, is increasingly threatening merchant profitability,” the report stated.
According to Juniper, AI is enabling fraudsters to remain ahead of security measures and commit sophisticated attacks on a greater scale. By creating credible messages and a large number of synthetic identities, AI is facilitating higher quality attacks with an unprecedented frequency.
It added that these technologies are also highly scalable; empowering fraudsters to heavily automate their attacks and overwhelm rules-based prevention systems.
The report also noted that online marketplaces have become prime targets for fraud, particularly after the global pandemic, which accelerated the shift toward digital transactions. With the surge in online shopping, businesses have been scrambling to adjust their fraud detection systems. Unfortunately, many traditional measures are no longer sufficient to fend off these increasingly sophisticated cyberattacks.
Moreso, sensitive customer data are seen to have increasingly become primary targets for fraudsters, particularly as businesses continue to expand their online operations.
The proliferation of artificial intelligence (AI) has opened the doors for cybercriminals to create more believable fraudulent messages and identities, making it increasingly difficult for both businesses and consumers to differentiate between genuine transactions and nefarious ones.
The growing sophistication of fraud techniques, combined with the automation of these attacks, allows fraudsters to launch a barrage of assaults that quickly overwhelm traditional, rule-based prevention systems. As a result, merchants are increasingly exposed to financial losses as they struggle to combat this onslaught of AI-driven fraud.
While Nigeria’s eCommerce sector has experienced explosive growth in recent years, propelled by factors such as the increased availability of mobile and internet services, the proliferation of digital payment platforms, and the unprecedented surge in online shopping following the COVID-19 pandemic, this growth has also transformed the sector into a prime hunting ground for increasingly sophisticated fraud schemes.
With cybercriminals becoming ever more adept at exploiting the vulnerabilities inherent in the digital economy, Nigeria’s eCommerce merchants, as well as its consumers, are increasingly vulnerable to AI-driven fraud attacks that threaten the continued growth and stability of the sector.
Industry experts have also identified fraud as a major obstacle to eCommerce growth in the country, highlighting that this issue deters many Nigerians from making online purchases. According to them, the loss of confidence in payment systems ultimately hampers the expansion of eCommerce as customers are increasingly worried about their payment information being compromised, while merchants are faced with challenges such as identity theft and chargeback fraud.
To address the growing threat of AI-driven fraud, Juniper Research underscores the necessity of implementing advanced fraud detection and prevention measures. The report highlights that AI-driven systems are becoming crucial for merchants, who should also integrate biometric identification into their checkout processes to enhance transaction security.
“By employing techniques like liveness detection, merchants can better safeguard their businesses and customers from increasingly sophisticated deepfake fraud attempts powered by AI,’ the report stated.
Thomas Wilson, the lead author of the Juniper Research report, emphasised the critical importance of incorporating artificial intelligence capabilities into fraud prevention systems.
He stated, “eCommerce merchants must seek to integrate fraud prevention systems that offer AI capabilities to quickly identify emerging tactics.”
Wilson further noted that the rapidly evolving landscape of eCommerce requires merchants to stay one step ahead of sophisticated fraud techniques. According to him, in developed markets, where larger merchants are particularly vulnerable to cyber threats, this need is even more pressing.
He also pointed out that these larger retailers are often prime targets for fraudsters who may engage in activities such as testing stolen credit cards, adding that by leveraging AI-driven solutions, merchants can enhance their ability to detect fraudulent activities in real time, thereby minimising potential losses and protecting their customers.
