by Maggie Munts
2022 has been a challenging year for e-commerce. Online marketplaces face slowing growth rates as consumers continue to return to stores, budget for inflation, and brace for recession. In April 2022, Amazon logged its slowest revenue growth since 2001. E-commerce sales have only grown 1.1% compared to last year, while in-store sales have risen 11.7% according to Mastercard’s most recent SpendingPulse Report.
Now, with recession on the horizon, digital marketplaces will also face increased fraud attempts as economic pressures intensify. According to the National Retail Federation, reports of retail fraud have been on the rise since Q4 2021, with e-commerce bearing the brunt of increasing fraudulent activities. Historically, images have been one key way that online marketplaces protect themselves against fraud, but now, rapidly evolving synthetic media and image deception technologies mean that these processes are no longer secure.
Digital marketplaces often use images and videos to protect themselves and their customers against fraud, verify product listings, and process returns and claims. For online marketplaces that facilitate fast delivery, last-mile authentication with a photo is now commonplace. Such protocols are necessary for fraud protection and trust in today’s digitized economy.
But now, rapidly evolving image deception technologies undermine existing safeguards. Photo and video ‘evidence’ are no longer a guarantee of truthfulness. Synthetic media technologies have not only become vastly more sophisticated, but they are now increasingly easy for anyone to access. Thousands of image deception tools, from text-to-image AI programs to advanced pixel erasers, are now readily available to everyday consumers.
Now fraudsters can easily create synthetic images or doctor existing photos to manipulate marketplace policies. Using synthetic photos or videos, anyone could claim that the product or delivery they received is damaged or defective and support their claim with falsified visual ‘evidence.’ And as more online marketplaces establish buyer protection programs and happiness guarantees, exposure to image-driven fraud, particularly ‘friendly’ fraud, increases.
Securing the Visual Future of E-Commerce in a Zero-Trust Digital Landscape
Now with the growing availability of image deception tools, the media that digital marketplaces once used to mitigate risk and preempt fraud, will actually accelerate it. As the economy continues to digitize, the attack surface for fraudsters has grown exponentially, as have the tools at their disposal. Image-driven processes, like returns, refunds, and last-mile delivery, now constitute a major vulnerability for online marketplaces, especially in light of the looming recession.
For digital marketplaces, the processes vulnerable to image-based fraud sit at the heart of a wide range of customer interactions. According to a study commissioned by the National Retail Federation, in 2021, for every $100 in returned merchandise accepted, US merchants lost $10.30 to return fraud, accounting for $78.4 billion lost to returns fraud in the US alone. Beyond returns, marketplace listings are another vulnerable image-driven process. Especially for the scaled marketplace platforms that rely on large seller populations, this is a notable area of risk for revenue and customer experience.
The internet is moving toward a zero-trust paradigm in which synthetic media will be ever-present and indistinguishable from authentic media. On a zero-trust internet, e-commerce platforms will have to verify the images that underpin these key digital retail processes. Brands with a digital presence will also need to assess their exposure to synthetic media, secure their content, and seek out additional brand integrity protections.
Marketplaces and e-commerce platforms should consider how emerging trust technologies like digital content provenance and image authentication can preempt image-based fraud and secure key retail processes. Securing image pipelines will be necessary to protect revenue and customers, especially as fraudulent activity increases during recession.
Maggie Munts is a former Amazon PM and MA candidate at Columbia University, specializing in digital governance.