Fraud has become the hidden cost of Europe’s e-commerce boom

Europe’s retail economy is undergoing a structural shift. E-commerce has moved from being a complementary sales channel to the primary growth engine for many merchants.

Online sales now dominating strategic priorities across both large retailers and SMEs. But as digital commerce accelerates, fraud has emerged as one of its most persistent and costly side effects.

According to Fraud in Europe – Counting the cost for retailers and shoppers, published by payabl., fraud is no longer a marginal operational issue but a systemic threat to trust, profitability and long-term growth.

Fraud Is No Longer a Cost of Doing Business

Fraud the hidden cost of e-commerce boom

The scale of the problem is stark. Across Europe, detected digital payment fraud per 100,000 transactions has more than doubled since 2022, while UK fraud losses alone reached £1.17bn last year.

For merchants, the impact extends far beyond direct financial loss.

The report finds that business leaders now spend an average of 166 hours per year dealing with fraud-related issues, equivalent to losing an entire working month to chargebacks, disputes and investigations.

Crucially, fraud behaves like a multiplier. In markets such as Germany, every euro lost to fraud translates into more than three euros of total cost once labour, replacement goods and external fees are accounted for.

For SMEs operating on thin margins, this “hidden tax” can quickly become existential.

Consumers Are Paying the Price Too

Fraud is reshaping consumer behaviour in measurable ways. One in four European shoppers report having been a victim of fraud, losing an average of £330 per incident.

Younger consumers are disproportionately exposed: 38% of Gen Z respondents say they have been defrauded, compared with just 17% of Baby Boomers.

This exposure is feeding caution.

Six in ten shoppers say they will abandon a purchase if something feels suspicious at checkout, while more than one in five stop shopping with a retailer entirely after experiencing fraud.

The erosion of trust is particularly damaging in e-commerce, where loyalty is fragile and alternatives are only a click away.

Peak Sales Periods, Peak Vulnerability

Fraud risk is not evenly distributed. Promotional events such as Black Friday, Cyber Monday and seasonal sales create predictable spikes in criminal activity.

The report identifies fraudulent returns, refund abuse and chargeback fraud as the most common attack vectors, with chargeback cases expected to rise sharply over the next two years.

At the same time, fraud tactics are becoming more sophisticated.

AI-enabled scams, impersonation and account takeovers are exploiting both technological complexity and human behaviour, placing pressure on merchants to respond in real time rather than retrospectively.

Security Without Friction Is the New Imperative

The central challenge for merchants is balance. Consumers expect security as standard, but excessive friction at checkout directly impacts conversion rates.

The research shows that shoppers are willing to tolerate modest security measures—such as two-factor authentication—provided they are clearly communicated and seamlessly integrated.

The conclusion is unambiguous: fraud prevention can no longer be treated as a bolt-on. It must be embedded into the payments experience itself.

Merchants that combine real-time monitoring, intelligent risk tools and transparent customer communication will be best placed to protect revenue, preserve trust and sustain digital growth in an increasingly hostile fraud environment.