Merchants prioritize loyalty, risk revenue as fraud soars

Professionals across payments and fintech are facing a growing dilemma: how to prioritize seamless customer experiences while effectively mitigating escalating fraud. According to AI-driven fraud prevention platform Ravelin’s newly released Global Fraud Survey 2025, many merchants are failing to strike the right balance—and it's costing them dearly.

Surging refund abuse

The annual report, based on responses from 1,466 fraud and payments professionals across 10 countries, revealed that 77 percent of global ecommerce businesses experienced a year-on-year rise in fraud. Particularly concerning is the surge in refund abuse, with over half of respondents (54 percent) reporting an increase and 55 percent expecting the trend to continue through 2026. Nearly one in 10 merchants are processing refund requests for more than 5 percent of their sales.

Yet despite the rising threat, a significant portion of merchants remain reluctant to take decisive action. On average, businesses now lose $10.6 million annually to fraud, with retail and travel sectors taking the hardest hit—averaging $11 million in losses each. In Canada alone, merchants reported a 28 percent increase in fraud activity, the highest globally, followed by the UK at 14 percent.

Brand protection issues

According to the report, the hesitation to implement tougher controls stems largely from brand-protection concerns. Sixty-six percent of merchants surveyed said maintaining customer loyalty and brand reputation takes precedence over halting refund abuse. Furthermore, 38 percent cited friction and customer churn as their biggest concerns with fraud prevention systems—despite evidence that modern, well-calibrated fraud tools enhance rather than hinder user experience.

“Too many retailers are happy to dismiss fraud as a cost of doing business,” said Martin Sweeney, CEO of Ravelin. “Downplaying fraud to protect the customer experience is a false dichotomy. With the right tools and intelligence, retailers can distinguish between legitimate shoppers and fraudsters—and deliver great experiences to both.”

Indeed, the report noted that effective fraud strategies don’t have to come at the expense of a frictionless checkout. Today's platforms can leverage AI, graph networks and behavioral analytics to minimize false positives while identifying suspicious behavior in real time—supporting both payment acceptance and fraud detection at scale.

The way forward

Revenue impact has become a dominant concern. For the first time in Ravelin’s annual reporting, merchants said fraud is more detrimental to revenue than to growth. More than half (52 percent) of businesses reported direct hits to their bottom line due to fraudulent activity in the past year.

Looking ahead, organizations are split on how to move forward. Half of the merchants favor a balanced approach that maintains both customer experience and strong security. However, 42 percent say they are leaning toward more aggressive tactics—blocking more transactions even if that introduces hurdles for legitimate buyers.

With fraud no longer a background issue but a core business risk, industry leaders are being urged to reconsider their strategies. “The stakes are rising financially and reputationally,” Sweeney said. “Merchants must stop seeing fraud prevention as a tradeoff. It’s a path to smarter, more sustainable growth.”

For payments and fintech professionals, the message is clear: protecting customer trust and increasing fraud resilience must go hand-in-hand.

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