AI-Generated Photos Undermining Ecommerce Refund Systems

Online shopping platforms have traditionally relied on customer-submitted photos to verify refund claims, but the rise of generative AI is now threatening this system as fraudulent refund requests using AI-generated images increase globally.

The Growing Problem of AI Refund Fraud

Merchants across ecommerce platforms are reporting suspicious refund claims supported by AI-generated photos showing damaged products. According to WIRED’s investigation on Chinese social media, certain product categories are particularly vulnerable to these scams: fresh groceries, inexpensive beauty items, and fragile products like ceramic cups—especially those that don’t require returns before refunds are issued.

In a notable case from China, a merchant selling live crabs received suspicious photos claiming most crabs arrived dead. The seller, with 30 years of crab farming experience, noticed anatomical inconsistencies in the images, including crabs with incorrect leg counts and positions. This case eventually led to police intervention, with the buyer being detained for eight days.

Global Impact and Detection Challenges

The problem extends well beyond China. Forter, a New York-based fraud detection company, reports that AI-doctored images in refund claims have increased by more than 15% since early 2024. Their CEO Michael Reitblat notes that frontline retail workers often lack the time to closely scrutinize each image, making even imperfect AI forgeries effective.

More concerning is that organized crime groups are exploiting this vulnerability at scale. In one instance, scammers submitted over a million dollars worth of fraudulent refund claims using AI-altered images showing damaged home goods, using sophisticated tactics to avoid detection.

Countermeasures and Consequences

Some sellers are turning to AI themselves to detect fraudulent images, though these detection tools remain imperfect. Experts warn that retailers might respond by implementing stricter return policies, which would negatively impact honest customers.

The situation parallels an earlier controversy where sellers were criticized for using AI-generated product photos, leading customers to complain that online shopping had become unpredictable.

The Broader Implications

At its core, this trend highlights a fundamental challenge: ecommerce depends heavily on trust, which is increasingly difficult to maintain as AI tools become more accessible. Current safeguards like AI watermarks are often easily circumvented.

For online shopping platforms to remain viable, they’ll need to develop new verification methods, revise refund policies, or create better accountability mechanisms to address AI-enabled fraud while maintaining a positive customer experience for honest users.