ChatGPT's Image Generation Could Be Driving Retail Fraud 

The retail industry is already facing a huge challenge with retail fraud - and this is only set to continue as generative AI tools reach new levels of sophistication.

The recent launch of ChatGPT's enhanced image generation capabilities marks yet another significant milestone in AI development - but also one that carries some serious implications for retail security and fraud prevention.

Generative AI is of course transforming retail in positive ways such as creative workflows, content production, and business operations (as it is across all industries). However, underpinning the excitement surrounding these advancements does lie some serious concerns: the same technology available to consumers is also making fraudsters faster and even more cunning. 

The democratisation of sophisticated image generation technology, such as ChatGPT’s Image Generation, is another example of that. It has the potential to create the perfect conditions for a new wave of retail fraud - one that could make the traditional verification process redundant and not fit for purpose

How Can GenAI tools Be Used To Enable Fraud?

The latest AI image generators can create images that look like real photographs as well as imagery from simple text prompts with incredible accuracy. It can reproduce documents with precisely matching formatting, official logos, accurate timestamps, and even realistic barcodes or QR codes. 

In the hands of fraudsters, these tools can be used to commit ‘return fraud’ by creating convincing fake receipts and proof-of-purchase documentation. What makes this use even more concerning is that, unlike previous forgeries that often contained telltale signs and human errors, AI-generated fakes are much better at creating indistinguishable dupes. 

The Potential Impact Stems Far & Wide

The concerns with this new technology extend far beyond merely returning items. For example, fake proof of purchase documentation can be used to claim warranty service for products that are out of warranty or purchased through unauthorised channels. Fraudsters could also generate fake receipts showing purchases at higher values than was actually paid for - then requesting refunds to gift cards for the inflated amount. Internal threats also exist too, as employees can create fake expense receipts for reimbursement. 

This is particularly damaging for businesses with less sophisticated verification processes in place. Perhaps the scenario most concerning of all is that these tools can enable scammers to generate convincing payment confirmations or shipping notices as part of larger social engineering attacks. Of course, the financial impact is substantial - industry estimates already place return fraud costs in the billions annually, and this could significantly increase as these GenAI tools become more accessible and sophisticated.

What About The Damage To Legitimate Customers?

It's not just about the direct financial impact on retailers, but also the potential impact of a ‘seamless customer experience’ for consumers. As retailers have to implement more complex and lengthy verification processes to mitigate sophisticated fraud, honest customers could face greater friction during their returns and exchange experience.

This creates a difficult dilemma for retailers. The National Retail Federation reports that 70% of consumers say a positive return experience encourages them to continue shopping with a retailer. Yet, creating stricter return verification processes to combat risks posed by genAI will not only frustrate these valuable customers, it could also impact their brand loyalty.

Hitting Back At GenAI With AI

While ChatGPT’s image generator is the latest advancement getting attention, it’s not the first or last genAI tool with these capabilities. So, how can retailers fight back? 

The solution to these challenges doesn't lie in reverting back to manual processes or creating higher-friction customer experiences. Retailers must instead fight AI-powered fraud with AI. By examining the full customer journey rather than just the return transaction, retailers can begin to identify suspicious patterns without creating friction for legitimate customers.

Advanced AI can be used to detect subtle inconsistencies that most models, and certainly not manual reviews or rules, can spot. 

The relationship between retailers and customers has always been built on trust and today's new genAI challenge isn't all that different. The successful retailers will be the ones that work out how to strike the right balance and view fraud prevention not as a cost center but as an essential component of the customer experience.

Doriel Abrahams is Principal Technologist at Forter

Image: Ideogram

You Might Also Read: 

A New Threat To Biometric Security:


If you like this website and use the comprehensive 7,000-plus service supplier Directory, you can get unrestricted access, including the exclusive in-depth Directors Report series, by signing up for a Premium Subscription.

  • Individual £5 per month or £50 per year. Sign Up
  • Multi-User, Corporate & Library Accounts Available on Request

Cyber Security Intelligence: Captured Organised & Accessible


 

« Unlocking Business Potential With Strategic IT Evaluations
Phishing Scams Put Hotel Guest Data At Risk »

CyberSecurity Jobsite
Check Point

Directory of Suppliers

ZenGRC

ZenGRC

ZenGRC (formerly Reciprocity) is a leader in the GRC SaaS landscape, offering robust and intuitive products designed to make compliance straightforward and efficient.

Authentic8

Authentic8

Authentic8 transforms how organizations secure and control the use of the web with Silo, its patented cloud browser.

Clayden Law

Clayden Law

Clayden Law advise global businesses that buy and sell technology products and services. We are experts in information technology, data privacy and cybersecurity law.

The PC Support Group

The PC Support Group

A partnership with The PC Support Group delivers improved productivity, reduced costs and protects your business through exceptional IT, telecoms and cybersecurity services.

North Infosec Testing (North IT)

North Infosec Testing (North IT)

North IT (North Infosec Testing) are an award-winning provider of web, software, and application penetration testing.

CoSoSys Endpoint Protector

CoSoSys Endpoint Protector

Endpoint Protector by CoSoSys is an advanced all-in-one DLP solution for Windows, macOS, and Linux, that puts an end to unintentional data leaks and protects from malicious data theft.

Veeam

Veeam

Veeam is the leader in intelligent data management for the Hyper-Available Enterprise.

Exabeam

Exabeam

Exabeam is a global cybersecurity leader that delivers AI-driven security operations.

Untangle

Untangle

Untangle provides network security products designed specifically for the below-enterprise market, safeguarding businesses, home offices, nonprofits, schools and governmental organizations.

Sky Data Vault

Sky Data Vault

Sky Data Vault provide the simplest and most cost effective method of Disaster Recovery / Business Continuity for mission critical systems and applications.

Ensconce Data Technology (EDT)

Ensconce Data Technology (EDT)

EDT’s focus is on providing solutions to properly sanitize Solid State Drives (SSD) and Magnetic Drives (HDD) before they are disposed or redeployed.

Slice

Slice

Slice offer subscription based Cyber Insurance for small businesses.

SafeTech Informatics & Consulting

SafeTech Informatics & Consulting

Safetech's OTShield detects, prevents and analyses cyber-attacks in SCADA and Industrial IoT systems by utilising state of the art deception techniques.

Tactical Network Systems (TNS)

Tactical Network Systems (TNS)

Tactical Network Solutions helps you discover hidden attack vectors in IoT and connected devices before someone else does.

Dion Training Solutions

Dion Training Solutions

Dion Training Solutions offer comprehensive training in areas such as project management, cybersecurity, agile methodologies, and IT service management.

Kivera

Kivera

Kivera enforces your organisation governance and security policies across cloud deployments preventing misconfigurations turning into attack vectors.

ThreatView by Turaco Labs

ThreatView by Turaco Labs

ThreatView combines extensive experience in digital forensics with advanced analytics and threat detection capabilities to protect eCommerce websites.

Transcendental Technologies

Transcendental Technologies

Transcendental is a consulting organization which specializes in customized assurance services in the fields of Localization, Mobile Software Solutions, Web Design, Cyber Security & Cyber Forensics.

Prequel

Prequel

Prequel is your real-time problem detection and resolution platform, powered by the global reliability community.

ThingsRecon

ThingsRecon

ThingsRecon empowers organisations to continuously map and manage their attack surface, uncover hidden vulnerabilities, and assess supplier cyber hygiene.

Cyberr

Cyberr

We’re transforming cybersecurity recruitment with Cyberr Intelligence – the AI-driven platform that connects top cybersecurity talent, both freelance and permanent, with leading employers worldwide.