E-Commerce Fraud in Europe: Key Trends and Mitigation Strategies for 2025

As online commerce becomes faster and more seamless, fraud is adapting just as quickly. In 2025, merchants across Europe face a highly dynamic threat environment, ranging from opportunistic refund abuse to highly coordinated real-time payment (RTP) scams. While innovation has driven frictionless consumer experiences, it’s also lowered the barriers for fraudsters.

The scale of the challenge is clear: 2.8% of revenue is lost to fraud across Europe, while fraud accounts for 3% of all orders. On the positive side, some merchants are fighting back effectively, achieving 15.1% win rate in chargeback disputes, thanks to enhanced evidence-gathering protocols and stronger fraud tooling.

This article maps out the most common fraud types facing European merchants today based on MRC 2025 Global eCommerce Payments And Fraud Report. 

Top Five Fraud Types in Europe

1. Phishing / Pharming / Whaling: Gateway to ATO & identity theft
2. Real-time-payment (RTP) fraud: Accelerating with SEPA Inst & Faster Payments
3. Refund / Policy Abuse: Rising post-purchase
4. First-party misuse (friendly fraud): Slowing; issuers now bearing more cost
5. Card Testing: Slight YoY decline

1. Phishing, Pharming and Whaling

These socially engineered fraud attacks are a leading cause of account takeovers (ATO) and identity theft. Fraudsters create fake login pages, send deceptive emails, or impersonate executives to harvest credentials and trick users into sending funds. The damage extends beyond monetary loss and phishing undermines brand trust and triggers legal liabilities.

How to Mitigate:

• Offer passkey/FIDO2 login options and apply step-up authentication on high-risk logins.
• Enforce domain authentication with DMARC, SPF, and BIMI to protect branded emails.
• Establish a short-link and link-preview policy to prevent abuse through redirection.
• Launch targeted customer education campaigns during peak shopping seasons to increase awareness.

2. Real-Time-Payment (RTP) Fraud

The rise of Faster Payments in the UK and SEPA Instant in Europe has led to a sharp increase in real-time-payment fraud. Because RTP transactions settle instantly and are irreversible, they offer fraudsters a fast and low-risk way to siphon funds into mule accounts. This type of fraud is common in platforms that facilitate withdrawals, payouts, or peer-to-peer transfers.

How to Mitigate:

• Apply behavioural biometrics and device fingerprinting at the point of payout.
• Enforce Confirmation of Payee (CoP) protocols and match recipient names against known trusted profiles.
• Embed AI risk scoring that evaluates velocity, amount, and behavioural anomalies within the <2-second decision window.

3. Refund / Policy Abuse

Refund abuse continues to top the list of fraud threats for European merchants. This post-purchase tactic includes false claims that an item was never received (INR), returning worn or counterfeit products for a full refund, or manipulating shipping and tracking data. Retailers in sectors such as apparel, electronics, and beauty are particularly vulnerable, especially during high-volume return periods.

How to Mitigate:

• Use item-level photo documentation and tamper-evident packaging to discourage abuse.
• Implement automated returns portals that validate serial numbers or IMEI codes.
• Introduce reasonable restocking fees and make refund terms prominent at checkout.
• Leverage PSD2-compliant SCA for refunds above a certain value to authenticate requests.

4. First-Party Misuse (Friendly Fraud)

Friendly fraud occurs when legitimate customers dispute transactions they authorised, often to obtain goods or services without paying. It remains a significant loss vector, with disputes increasingly shifting to the responsibility of issuers. This is especially problematic for digital goods, subscription services, and marketplaces.

How to Mitigate:

• Capture and store compelling evidence such as IP address, device ID, user account activity, and delivery logs.
• Use real-time chargeback alerts to intervene early and refund small disputes to avoid processing fees.
• Ensure receipts, digital terms of sale, and refund policies are clear, concise, and delivered immediately post-purchase.
• Consider shortening the refund eligibility window for high-risk product categories.

5. Card Testing

Card testing remains a major concern, particularly for UK-based merchants offering low-value items, free trials, or charity donations. Fraudsters use automated bots to test batches of stolen card credentials through small transactions, seeking validation before committing larger fraud. The resulting spikes in authorisation failures can harm platform reputation and payment acceptance rates.

How to Mitigate:

• Deploy velocity rules and block mismatches between card BIN country and user IP location.
• Set minimum-order thresholds to reduce attractiveness for card testers.
• Use Address Verification Service (AVS) and CVV validation as hard fail criteria.
• Configure 3-D Secure 2 to step up only when abnormal testing patterns are detected.

Cross-Cutting Defences

Close the Early-Stage Gap

Only 16% of EU merchants currently screen users during the browsing or account-creation stages. This early blind spot allows synthetic identities and fake accounts to proceed unchecked.

• Deploy device fingerprinting and behavioural tracking during the research phase.
• Use consortium threat data to detect signals of fraud well before checkout.

Automate and Reduce Manual Review

While 50% of European transactions are screened digitally, manual review still accounts for 24%, introducing inconsistency and slowing fulfillment.

• Use orchestration platforms that automate low- and medium-risk decisions.
• Reserve manual review for edge cases and complex disputes.
• Cut “customer insult” rates by reducing false positives and unnecessary friction.

Data-Driven Priorities for 2025

European merchants are generally prioritising the following:

• Expanding fraud-relevant data access across teams (40%)
• Reducing time analysts spend on routine decisions (30%)
• Eliminating manual review altogether in low-risk cases (24%)

Regulatory and Scheme Requirements

• EU: PSD2 remains in force, but PSD3 is in draft, with proposals for broader scam liability and mandatory IBAN/name matching.
• UK: PSR 2024 expands rules around Confirmation of Payee (CoP) and introduces mandatory APP fraud reimbursement up to £85k by late 2024.
• Schemes: Visa Compelling Evidence 3.0 and Mastercard DIN rules now require richer data and real-time response capabilities.

Merchants should ensure their tools support SCA exemptions like low-value transactions, trusted beneficiaries, and merchant-initiated transactions (MIT).

Conclusion

To stay competitive in 2025, European merchants must navigate the growing sophistication of fraud without adding friction that deters legitimate customers. With the continued growth of instant payments and the introduction of the EU Digital Identity Wallet, new attack vectors are likely to emerge. However, AI and machine learning will become core infrastructure for fraud defence, alongside real-time data-sharing across platforms.

Merchants who invest in journey-based, AI-driven defences will be best positioned to scale confidently.

Sift can help European businesses reduce fraud loss, automate complex decisions, and protect customer trust at every stage of the user journey. By utilising Sift’s real-time machine learning, global fraud network, and orchestration tools, merchants gain the precision and agility to stop attacks early.