Fraud has evolved into an operational challenge that demands significant resources from retailers. Recent research has revealed that 85% of merchants surveyed reported their business has been targeted by scams or fraud attempts within the last 12 months. This blanket exposure highlights the insistent problem facing the retail sector.
The financial and operational burden extends well beyond direct monetary losses for merchants too. Data from payabl.’s fraud in Europe report revealed that business leaders now spend an average of 3.6 hours per week addressing fraud-related issues, an approximate 166 hours annually.
This represents a full working month away from strategic priorities to managing the fraud issue; a hidden cost that particularly impacts smaller merchants with limited resources.
The true cost of fraud
The direct financial impact of fraud on merchants reveals only part of the challenge. For European businesses that fall victim to attacks, the total cost far exceeds the initial loss. In Germany for example, for every €1 lost to fraud, retailers incur around €3.43 in total costs when accounting for labour expenses, external costs, fees, and replacing lost or stolen goods.
In the UK, losses on card-not-present transactions rose to £225 million in 2024, representing an 11% increase over the previous year. This upward trajectory continues, with total card fraud losses of £572.6 million reported in 2024, a 3.9% increase from 2023.
Additionally, card-not-present fraud accounts for approximately 70% of these losses, marking an 11% year-on-year increase.
The broader European picture shows a similar trend. Card fraud losses across the EMEA region increased from €1.493 billion in 2021 to €1.57 billion in 2024, approaching the 2015 peak of €1.64 billion.
Conversely, Portugal and the Netherlands were the only countries to see fraud levels fall in the same period. Overall, these figures demonstrate that fraud is steadily rising across the region, demanding attention from merchants.
Measuring the impact on consumers
Consumers often bear the brunt of costs associated with fraudulent activity. Data shows that one in four consumers (26%) report having been a victim of fraud at some point, with average losses of £330 (€380) per incident.
The financial impact varies significantly by generation, with Millennials experiencing the highest losses at £478 (€550), followed by Gen Z at £394, Gen X at £244, and Baby Boomers at £155.
However, Gen Z respondents were the most likely to have been defrauded online in some form at 38%, compared to just 17% of Baby Boomers, who are more overall likely to fall victim to romance scams — a type of fraud that according to UK Finance, has seen £20.5 million lost in the first six months of 2025, affecting around 3,000 victims.
This generational divide reflects the different exposure levels encountered by consumers, along with varying transaction patterns. The trend shows that younger, more digitally engaged consumers face greater fraud risk, despite their inherent familiarity with online platforms.
The fraud landscape
Fraudulent returns and refund fraud have emerged as the most common type of fraud facing businesses in the past 12 months, affecting 44% of merchants. This category includes practices such as wardrobing, where customers return used items as new, and schemes involving duplicate charge claims on identical simultaneous purchases.
The scale of return fraud is substantial for merchants. Retailers lost $103 billion to fraudulent returns and claims in 2024, representing approximately 15% of the projected $685 billion in total returns. Purchases by fraudsters using stolen payment details affect 36% of merchants, while chargeback fraud impacts 31%.
Chargeback fraud also presents a particularly acute challenge for merchants, with projections indicating it will reach 337 million cases globally by 2026, a 42% increase over 2023 levels. Other sources project even higher figures, with chargeback fraud expected to cost merchants $28.1 billion by 2026.
Overall, SMEs appear to be disproportionately affected by chargebacks, with 34% reporting this issue compared with 29% of larger merchants. Furthermore, 71% of merchants indicate that chargeback rules too often favour customers, creating financial strain on their businesses.
Other significant fraud vectors include employees being tricked into giving fraudsters access to company systems (28% of merchants) and cloned cards (26%).
Operational responses
The repeated occurrence of fraud has created what effectively acts as an additional ‘tax’ for merchants, which consumes both time, money and resources while continuing to impact millions of consumers across Europe.
Merchants are gradually implementing various strategies to address the rising threat, though the persistence of higher fraud rates suggests current measures require improvement.
For chargebacks specifically, the recommended approach includes clearly communicating refund and cancellation policies at checkout. This can improve customer service by resolving issues before escalation, while implementing advanced fraud controls can identify and block suspicious activity before transactions take place.
The broader challenge lies in balancing fraud prevention with overall customer experience. Overly restrictive security measures can risk creating friction that drives customers to competitors, while insufficient controls expose businesses to mounting losses.
Finding this balance requires sophisticated detection systems that can distinguish legitimate transactions from fraudulent ones, with minimal impact applied to the customer lifecycle.
The path forward for merchants
Fraud has transitioned from a background issue that could be ignored to a major operational challenge for retail and ecommerce businesses.
The 85% of merchants experiencing fraud attempts in the past year face not only direct financial losses, but also substantial time costs and administrative burdens.
Now, as fraud continues to rise across multiple vectors, retailers must prioritise investment in detection and prevention systems that match the sophistication of modern fraudulent techniques. An example is AI-powered decision-making, which, thanks to our partnership with Sift, means merchants can benefit from enterprise-grade intelligence to reduce fraud rates.
The data from the fraud report demonstrates that current approaches are insufficient in reducing fraud losses for merchants. As ecommerce grows and fraud methods evolve, retailers who employ proactive fraud detection measures can better maintain customer experiences and lifecycles and be better positioned to protect revenue and nurture customer trust.
Download ‘Fraud in Europe: Counting the cost for retailers and shoppers’ to find out more about how retailers can better tackle fraud and handle retail growth.