Fashion hit by fraud surge during pandemic

The fashion industry has been hit with a rise in online fraud during the pandemic, largely triggered by the growth of e-commerce over the past 12 months.

Research by fraud detection and payment acceptance company Ravelin, found that 32 per cent of fashion retailers have experienced an increase in online payment fraud in the past year.

A further 44 per cent have experienced a rise in account takeover and promotion abuse.

The research, based on a survey of 1,000 fraud and payments professionals working at online retail companies across the globe, revealed that 38 per cent of retailers have seen a rise in friendly fraud.

More than half of respondents said they had witnessed a rise in refund abuse.

This can be partly attributed to ‘wardrobing’, where customers purchase clothing to take photos, before returning items.

“The conditions of the pandemic have created a veritable petri dish for the growth of fraud,” said Mairtin O’Riada, co-founder and chief information officer at Ravelin. “Retailers are scrambling to drive e-commerce and are handling extremely high volumes of transactions online, while also trying to fulfil a growing number of online deliveries."

O’Riada said that fraud teams within fashion brands must mitigate the threat of fraud to protect profit margins.

“The only way to do that effectively is through machine learning-based technology,” he said. “However, more fashion retailers use rules-based systems than any other type of retailer to combat fraud. Now’s the time to consider more sophisticated technology.”

According to Ravelin, despite the rise in fraud over the past 12 months, nearly a quarter of fashions brands have a fraud team of five people or fewer.

This is set to change through, with three quarters of fashion brands are now expecting to increase their fraud team size and budgets, the research found.

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