Retailers have long faced fraud in many forms, from stolen credit cards to friendly fraud chargebacks. But a new breed of threat is emerging: AI-powered fraudsters. Criminals are harnessing the same machine learning and generative AI tools that businesses use to innovate, creating synthetic identities, manipulating documents, and even deploying deepfakes to bypass authentication systems. For senior fraud and risk professionals in UK retail, the challenge is escalating fast…
The Rise of Synthetic Identities
Unlike traditional identity theft, synthetic identities combine fragments of real and fabricated data to create a convincing but non-existent customer profile. AI makes this easier by generating realistic names, addresses, and even credit histories that pass basic KYC (Know Your Customer) checks. Fraudsters then use these identities to open accounts, apply for credit, or exploit loyalty programmes, often undetected until significant losses occur.
Deepfakes and Document Manipulation
Generative AI is also enabling hyper-realistic deepfakes (fake images, videos, or voices) that can be used to trick biometric verification or customer service agents. Retailers using video-based KYC, voice authentication, or scanned ID checks are increasingly at risk of manipulation. For example, a fraudster could use an AI-generated voice clone to reset an account password via a contact centre, or a doctored passport scan to create a fraudulent profile.
Countering AI with AI
The most effective defence is to fight AI with AI. Modern fraud platforms use machine learning and behavioural analytics to detect anomalies that synthetic identities or deepfakes can’t easily mimic, such as unusual device fingerprinting, inconsistent geolocation data, or impossible behavioural patterns.
Retailers are also adopting multi-layered authentication strategies that go beyond static checks. Adaptive systems analyse real-time behaviour, mouse movements, typing cadence, session switching, providing signals that are harder for AI-driven fraud to replicate.
Human Oversight Still Matters
While automation is critical, fraud teams also need human expertise. Training frontline staff to recognise the warning signs of synthetic accounts or manipulated media, and ensuring strong escalation protocols, remain key parts of a robust fraud strategy.
A Strategic Priority for 2026
The retail sector is already seeing regulators and payment providers raise concerns about AI-driven fraud. Proactive retailers are partnering with AI fraud solution vendors, tightening onboarding checks, and sharing intelligence across the ecosystem to stay ahead of criminal innovation.
Fraudsters are innovating with AI, so retailers must innovate faster. By combining advanced detection technologies, adaptive processes, and skilled human oversight, brands can protect both their bottom line and their customer trust in the face of this new era of fraud.
Are you searching for AI solutions for your organisation? The Fraud Prevention Summit can help!
Photo by Erik Mclean on Unsplash
