Online fraud and false declines cost retailers sales and customers

October 25, 2026 Koin 3 min read

Overly strict security controls can block legitimate purchases, costing online retailers sales and driving away customers who may never try to buy again.

Table of Contents

Digital fraud not only causes financial losses for online retailers; it can also reduce legitimate sales and erode consumer trust.

Colombian retailers face the challenge of preventing digital fraud without blocking legitimate purchases or passing the costs of fraudulent transactions on to consumers.

Chargeback losses in Colombia reached an estimated US$43 million in 2025 and could rise to US$48 million in 2026, according to projections by fintech company Koin, which specializes in e-commerce fraud prevention. The problem is compounded by erroneous transaction declines, which can result in lost sales and customers who never return.

Among the mistakes that affect online retailers’ profitability are treating fraud as an inevitable cost, neglecting chargeback management, and implementing security controls that prevent legitimate transactions. Together, these practices can cause financial losses and erode consumer trust.

The cost of accepting fraud

Related Posts:

Accepting fraud losses as a normal part of doing business can lead some retailers to offset them by raising prices. However, passing these costs on to consumers does not solve the problem and can affect competitiveness, the shopping experience, and trust in the brand.

Fraud prevention technologies make it possible to analyze large volumes of data to identify suspicious patterns and anomalous behavior in real time. The technologies used include artificial intelligence (AI), generative artificial intelligence (GenAI), and machine learning.

“The best way to tackle fraud is through anti-fraud technological tools, such as artificial intelligence (AI), generative AI (GenAI), and machine learning, which play a fundamental role in protecting users and businesses. These AI-based solutions can analyze large volumes of data in real time, identifying suspicious patterns and anomalous behavior,” says Dieter Spangenberg, Koin’s chief fraud officer.

Chargebacks put pressure on costs

Chargebacks occur when a customer disputes a transaction with their financial institution. As a result of the process, the payment may be reversed and the funds withdrawn from the merchant.

Not all such cases involve fraud. Some stem from legitimate complaints, such as incorrect charges or products that were never delivered. Others may be related to fraudulent transactions or so-called friendly fraud, which occurs when an authorized purchase is later disputed or denied improperly.

Koin estimates that chargeback losses in Colombia will rise from US$43 million in 2025 to US$48 million in 2026.

Failure to follow up, a lack of transaction documentation, and responses submitted after established deadlines reduce the chances of defending legitimate sales and can increase operating costs.

“It is very important for online stores to identify phishing attempts, fraudulent purchases, or the misuse of personal information almost instantly, and take action by blocking or flagging risky transactions before they cause harm to either a user or the merchant itself; in this way, they will be able to create a safer and more trustworthy digital environment, ensuring business success,” Spangenberg emphasizes.

Erroneous declines also come at a cost

Overly restrictive security systems can block legitimate transactions. This phenomenon, known as false positives, represents a business cost that can go unnoticed in traditional fraud metrics.

According to Koin, 40% of consumers do not try to make another purchase after experiencing an erroneous decline. Causes of these blocks include overly strict detection algorithms, a lack of context in risk assessments, outdated fraud models, and communication problems with card issuers.

To reduce these risks, merchants can verify payments against official sources before delivering products, establish protocols for returns and high-risk orders, restrict access to sensitive information, use reliable security tools, and provide regular employee training.

It is also important to record incidents, review complaint patterns, and adjust controls according to the risks associated with each sales channel. Automating certain verification processes can help reduce errors, provided it is implemented with clear criteria and mechanisms to review potential false positives.

Digital fraud prevention requires balancing the detection of suspicious transactions with the protection of legitimate purchases. Proper chargeback management, incident tracking, and the review of security controls make it possible to address risks without neglecting the consumer experience.