Retailers are being hit by a new wave of AI-powered refund fraud, as shoppers and organised crime groups use generative AI to create fake damage claims and convincing return scams.

New data from global digital trust and fraud prevention platform Forter found that AI-generated damage claims are now the fastest-growing form of return abuse.

The company said increasingly flexible retail policies were being exploited by both consumers and organised fraud networks.

With generative AI tools now widely accessible, fraudsters can quickly doctor receipts or create realistic images of damaged goods, including apparently torn clothing, to support false refund claims.

Forter warned that retailers are facing coordinated groups using AI to fabricate convincing “evidence”, from fake damage photos to sophisticated “item not received” narratives.

The company said some fraud rings have also scaled their operations by offering “returns-as-a-service”, taking a percentage of the proceeds in exchange for helping shoppers secure fraudulent refunds.

The attacks are evolving faster than legacy fraud systems can respond, with returns becoming a particular weak point for retailers.

Fashion retailers are especially exposed, as high return rates already place pressure on margins and operational costs.

Forter’s data also found that 53 per cent of merchants are reporting issues with “wardrobing”, where shoppers wear clothing before returning it.

Meanwhile, 30 per cent of consumers admit to buying additional items purely to qualify for free shipping before later returning them.

The pressure on retailers is mounting, with 44 per cent of UK businesses saying they are being affected by returns and refund abuse.

Almost half of retail leaders said the issue had become so severe that they had considered scaling back operations or shutting down entirely this year.

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