The rise of the criminal customer

In a world where online businesses face a growing threat from cyber fraud, a new key player has emerged—the criminal customer.

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A survey of chief financial officers (CFOs) across 10 countries, commissioned by fraud prevention platform Ravelin, has found that criminal activity is on the increase across the board, in areas including:

  •   Online payment fraud (54%)
  •   Account takeover (50%)
  •   Returns and refunds abuse (52%)
  •   Promotions abuse (52%)

Audacious individuals who participate in these activities have become the number one risk factor for one in three online merchants.

Organised criminal fraud is the main issue – with payments fraud taking the top spot as the number one business risk. 

57% of CFOs polled identified increased evidence of ‘fraud as a service’. These sophisticated criminal schemes involve organised groups buying items using stolen card details and reselling them to customers who are often unaware of their involvement in criminal activity. 

But it doesn’t end there. “Friendly fraud”, including account takeovers, unpaid invoices, returns and promotions abuse and policy abuse follow closely behind, posing additional challenges, particularly for smaller businesses with fewer resources to fight back. 

Friendly fraud: a rising concern

Most concerning, Ravelin’s survey reveals that merchants are facing significant threats not only from organised criminals, but also from their own customers. Criminal activity by customers has now emerged as the foremost risk factor, as stated by more than a third of finance leaders.

Friendly fraud, also known as chargeback fraud or first-party fraud, refers to a deceptive practice where a legitimate customer makes an online purchase or transaction and then disputes the charge with their financial institution, claiming that the transaction was unauthorised or fraudulent. 

Despite the term “friendly,” it is considered a form of fraud because the customer intentionally seeks to obtain goods or services without paying for them.

Friendly fraud typically occurs when a customer receives the purchased item or service but decides to exploit the chargeback process as a means to avoid payment. They may falsely claim that they did not receive the product, that it was different from what was described, or that the transaction was fraudulent.

There are several motivations behind friendly fraud. Some customers may engage in this behaviour due to buyer’s remorse, attempting to get a refund for a product they no longer want or need. Others may see it as an opportunity to exploit the system, essentially stealing from the merchant. 

However, the current economic situation –  rising inflation and the increased pressures of the cost of living crisis – is also turning honest customers into criminals out of desperation. 

The cost of living is spurring five-finger discounts

Beyond online fraud, businesses of all sizes are also grappling with an offline criminal activity: shoplifting

Anonymous shoplifters who spoke to Novara Media said the cost of living crisis had pushed them to steal everyday essentials. Some even said it has become more socially acceptable in their circles due to the cost of living crisis.

Shop workers have even admitted looking away at times when they have witnessed people stealing things like baby wipes, nappies or food for their infants. Many admit to choosing empathy over enforcement,  claiming they are “not paid enough to chase around shoplifters”.

In March, grocery prices in the UK skyrocketed to unprecedented levels, resulting in a staggering increase in the average annual food spending for households. 

Comparatively, the UK’s leading supermarket chains, namely Tesco, Sainsbury’s, and Asda, amassed a combined profit of £3.2 billion during the 2021-22 tax year, representing a huge increase of 97% compared to the previous twelve months.

According to estimations by the British Retail Consortium, there were a staggering 8 million reported “theft incidents” in British retail stores in 2022, resulting in financial losses of £953 million

Shoplifters affected by the cost of living crisis justify their actions as hitting the profits of shareholders rather than harming hardworking individuals. SME owners may beg to differ. 

While this rise of the criminal customer is particularly evident among younger age groups such as Gen Z – with digitally-savvy 16-34-year-olds showing higher involvement in this first-party fraud – the cost of living crisis has affected all age groups in the UK and no age group is exempt from these activities.

The dispute resolution dilemma

As new payment methods gain popularity, they bring a new set of challenges for online merchants. 

While debit and credit cards remain common targets for card fraud, they are also relatively easier for merchants to challenge in fraud disputes. 

Newer methods such as Apple Pay, Google Pay, and buy now pay later (BNPL) schemes like Klarna however, pose harder hurdles for dispute resolution for the merchants. Only a mere 5% of respondents claim success in challenging BNPL payment disputes, highlighting the need for more effective strategies.

The battle against fraud (and how finance leaders are attempting to stay one step ahead)

Finance leaders recognise the need to stay ahead of the fraud game in the face of these challenges.

Business analysts and owners overwhelmingly expect their fraud teams to grow over the coming months – with a third of respondents agreeing their teams could grow by 20% or more. But they are also implementing other more grassroots strategies to mitigate the risks as well. These include: 

  • Improving communication and customer service: By being responsive and attentive to customer concerns, merchants can address any issues promptly. This helps build trust and minimises the likelihood of customers resorting to chargebacks.
  • Implementing fraud detection tools: Merchants can leverage specialised software and systems designed to identify suspicious patterns and behaviours. These tools can flag potentially fraudulent transactions, allowing merchants to take appropriate action and prevent losses.
  • Maintaining detailed transaction records: Keeping thorough records of customer transactions is essential in cases of disputes. These records serve as evidence to validate the legitimacy of the transaction, protecting the merchant’s interests when challenged with fraudulent chargebacks.
  • Collaborating with payment processors and financial institutions to validate transactions and share data on fraudulent activities

Rather than pouring more resources into the problem, CFOs and CROs can also turn to automation to detect and prevent fraudulent transactions at their root. 

Automation offers a solution that enables businesses to stay ahead of the fraud game by swiftly identifying and stopping fraudulent activities before they can cause significant damage.

By leveraging advanced technologies, such as artificial intelligence and machine learning, finance leaders can implement automated systems that analyse vast amounts of data in real-time. These systems are designed to identify patterns, anomalies, and suspicious behaviours that may indicate fraudulent activity. This proactive approach allows businesses to take immediate action, blocking transactions or flagging suspicious accounts before any harm is done.

By detecting and analysing fraudulent patterns, finance leaders can gain a deeper understanding of their customer’s behaviour, identify potential vulnerabilities in their systems, and develop targeted strategies to enhance security measures.


While friendly fraud can be challenging to combat, it is crucial for merchants to establish robust policies and procedures and educate customers about the consequences of fraudulent chargebacks. In this way,  a fair and secure e-commerce environment for both buyers and sellers.

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Written by:
Stephanie Lennox is the resident funding & finance expert at Startups: A successful startup founder in her own right, 2x bestselling author and business strategist, she covers everything from business grants and loans to venture capital and angel investing. With over 14 years of hands-on experience in the startup industry, Stephanie is passionate about how business owners can not only survive but thrive in the face of turbulent financial times and economic crises. With a background in media, publishing, finance and sales psychology, and an education at Oxford University, Stephanie has been featured on all things 'entrepreneur' in such prominent media outlets as The Bookseller, The Guardian, TimeOut, The Southbank Centre and ITV News, as well as several other national publications.

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