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Study: Fraud Trends in African E-Commerce

by Kevin Mwangi July 13, 2025, 1:50 am 325 Views

Africa’s e-commerce sector is booming, but fraud is threatening its growth. With online shopping projected to generate $46.1 billion by 2025, the continent faces severe challenges. Cyberattacks and scams cost businesses and consumers $4 billion every year, undermining trust and investment.

Key highlights from the study:

Mobile-driven growth: Smartphone adoption in Sub-Saharan Africa reached 55% in 2023 and is expected to hit 86% by 2030, driving e-commerce expansion. However, mobile fraud is rising.
Main fraud types: Account takeovers, AI-driven scams, payment fraud, and phishing attacks are the most common threats.
Regional differences: East Africa has the highest fraud rejection rates (27%), while West Africa faces increasing biometric fraud.
Seasonal spikes: Fraud surges during shopping periods like Black Friday, with Kenya reporting a fraud rate of 10.3% in 2024.
AI and deepfake risks: Criminals use AI to bypass security, creating fake identities, reviews, and even voice clones.

Fraud impacts businesses through financial losses, increased operational costs, and eroded consumer trust. For every $1 lost to fraud, businesses spend an additional $4.60 on mitigation. Small businesses are especially vulnerable, with some shutting down due to these challenges.

Solutions: Businesses are adopting layered security measures like biometric authentication, AI-powered monitoring, and multi-factor authentication. However, balancing security with user experience remains critical to maintaining customer trust.

Fraud prevention is no longer optional. As Africa’s digital economy grows, addressing these risks is essential to sustaining progress.

Types of E-commerce Fraud and Tips to Prevent Fraud

Main Fraud Types in African Mobile E-Commerce

E-commerce platforms across Africa face a variety of fraud schemes that exploit both technological weaknesses and human error. Over time, these schemes have grown more sophisticated, moving from basic scams to operations fueled by artificial intelligence and organized criminal networks.

Most Common Fraud Schemes

Account Takeover (ATO) is one of the most damaging forms of fraud in African e-commerce. Cybercriminals gain unauthorized access to user accounts, misusing stored payment details and personal information. The scale of this issue is alarming – fraud attempts during user authentication in 2024 were four times higher than during account registration.

Payment fraud has become more advanced, with criminals using AI to test stolen credit card numbers at an alarming speed, often bypassing conventional defenses. Digital banks reported that 35% of fraud attempts targeted biometric and document verification systems.

Refund fraud is another prevalent scheme. In this case, fraudsters use stolen payment information to purchase items and then claim refunds to alternate accounts or allege that items were never delivered. These cases often appear legitimate until a deeper investigation reveals the deceit.

AI-powered deepfake scams are a newer and rapidly growing threat. Between Q2 and Q4 of 2024, deepfake-related incidents in Africa rose sevenfold. Criminals use AI to create fake identities that can bypass traditional verification systems. Ola Williams, Managing Director of Microsoft Nigeria and Ghana, shared insights on this trend:

"AI technology is giving cybercriminals the tools to create incredibly deceptive scams. With the ability to draw on fake product reviews, AI-generated websites, deepfakes, and voice cloning, these scammers can carry out their campaigns on a massive scale while still appearing authentic. It’s vital for businesses and individuals in Nigeria to keep abreast of developments as these AI-driven tactics become increasingly sophisticated."

Phishing attacks have also become more convincing due to AI. The National Kenya Computer Incident Response Team (KE-CIRT/CC) reported a sharp increase in AI-generated phishing attacks and deepfake scams in early 2025. During the first quarter, the country detected 2.5 billion cyber threat events – a staggering 201.85% increase from the previous period.

These fraud schemes are not uniform but instead show distinct patterns based on regional and seasonal factors.

Fraud Patterns by Region

The regional variations in fraud methods add another layer of complexity. In East Africa, the fraud rejection rate reached 27% in 2024, largely due to the prevalence of low-quality identity documents that are easy to falsify.

West Africa, on the other hand, has higher rates of biometric fraud. Criminals here increasingly use AI-powered tools to bypass facial recognition and fingerprint systems. Meanwhile, South Africa faces challenges with outdated identity documents, such as Green ID Books, which show fraud rates 500% higher than newer Smart ID cards. Central Africa experienced a sharp spike in fraud attempts at the end of 2024, continuing an upward trend from the previous year. Mobile SDKs in the region detected twice as much fraud as other integration methods, emphasizing the need for mobile-first fraud detection strategies.

Fraud During Peak Shopping Periods

Shopping seasons bring a surge in fraudulent activity, with e-commerce fraud peaking during these high-traffic times. In January and December of 2024, fraud rates hit 29% and 26%, respectively.

The 2024 Black Friday period (November 28 – December 2) saw significant variations in fraud rates across African nations. For example, Kenya reported a suspected fraud rate of 10.3%, while South Africa’s rate was much lower at 1.9%. The table below highlights fraud trends during Black Friday compared to the rest of the year and the previous year:

Country	Black Friday 2024	Rest of 2024	Black Friday 2023
Kenya	10.3%	11.6%	12.6%
Namibia	6.1%	7.2%	4.3%
Rwanda	5.2%	7.0%	6.8%
Zambia	4.5%	6.5%	11.0%
Botswana	3.8%	2.7%	1.1%
South Africa	1.9%	2.7%	3.0%

Jason Lane-Sellers, director of fraud and identity at LexisNexis Risk Solutions, explained the challenges of these busy periods:

"During busy periods like the year-end holiday shopping season, fraud attempts double or triple. Fraudsters know that businesses aim to accept as many customers as possible, so they try to hide among the high transaction volumes."

The problem is further compounded by the extended nature of shopping seasons. Amritha Reddy, senior director for solutions at TransUnion Africa, highlighted this trend:

"Across Africa, we have observed that Black Friday shopping has extended beyond the original five-day period, with retailers promoting sales throughout the entire month of November. We anticipate that the general lengthening of the holiday shopping season were factors in the decline in suspected Digital Fraud during the time under analysis compared to the rest of the year for most Africa countries."

New e-commerce businesses are particularly vulnerable during these high-pressure periods. The need to process large transaction volumes quickly often leads to relaxed security measures, providing opportunities for fraudsters. The 2023 LexisNexis Risk Solutions Cybercrime Report for the EMEA region noted an 84% increase in human-initiated attacks on e-commerce platforms and a 25% rise in bot-driven fraud during these peak shopping times.

These seasonal spikes underscore the growing challenge of securing Africa’s expanding digital economy.

Technology Behind Modern Fraud Schemes

Fraud targeting African e-commerce has evolved at an alarming pace, driven by advancements in AI and machine learning. Tools once reserved for legitimate businesses are now in the hands of cybercriminals, creating a constant battle between fraudsters and security experts.

AI and Deepfakes in Fraud

Generative AI is now behind more than a third of new biometric fraud cases in Africa. Deepfake videos, in particular, have seen a massive increase, now accounting for 7% of global identity fraud attempts. These technological advancements have taken fraud to a new level, enabling more precise and convincing attacks.

One of the most troubling aspects is AI’s ability to bridge linguistic and cultural divides that once offered some protection. Rob Woods, Director of Fraud, Identity and Biometrics at LexisNexis Risk Solutions, explains:

"You know, you don’t necessarily get defrauded by your population, you get defrauded by different nationalities, and especially in smaller countries where there’s that sort of local loyalty… But if generative AI can mimic the local accent and local language, then it hooks people in."

With AI, fraudsters can create fake product reviews, clone voices, generate deepfake videos, and even build entirely fabricated websites with striking accuracy. A chilling example of this came in February 2024, when a multinational company’s Hong Kong office lost US$25.6 million to a deepfake video call impersonating its CFO. MJ Givens Kgasi, an analyst at Octa, commented:

"These impersonation scams represent a dangerous new phase in financial fraud. It’s no longer about spotting unlicensed operators – scammers are hijacking the credibility of our most trusted leaders and institutions."

These AI-powered tools are reshaping how fraudsters target even the most secure systems.

Fraudsters are increasingly exploiting weaknesses in authentication and verification systems rather than focusing solely on creating fake accounts. Weak Know Your Customer (KYC) protocols have made fintech platforms particularly vulnerable, as criminals now prefer to misuse real identities instead of fabricating synthetic ones.

The scale of the problem is staggering. In Q2 2024 alone, Nigerian banks lost ₦42.6 billion (around US$26.6 million) to fraud targeting login and verification systems. Cyberattacks on African businesses also surged by 20% in the first quarter of 2024. Telecom companies have not been spared either. MTN reported losing US$53 million to mobile money fraud in Nigeria in 2022, while Safaricom faced losses exceeding US$4 million due to SIM card fraud in the same year.

On a more positive note, the adoption of biometric verification has reduced fraud rates during KYC checks to 25% in 2024. Mark Straub, CEO of Smile ID, highlights the dual role of AI in this battle:

"The future of fraud prevention lies in adaptability. While AI provides fraudsters with powerful new tools, it also helps security practitioners harness global intelligence to counter zero-day attacks and automate processes that were once manual."

However, even with these advancements, insider threats continue to complicate matters.

Inside Help and Complex Fraud Networks

Insider threats remain a significant challenge, as individuals with authorized access can exploit system vulnerabilities. The financial toll of such incidents has skyrocketed, with the average cost of insider-related fraud jumping from US$8.3 million in 2018 to US$16.2 million in 2023.

These schemes often involve intricate networks of insiders working together to manipulate data, submit false reports, and mishandle sensitive information. A notable example is a crime syndicate operating on Telegram in Chinese, which significantly escalated attacks on African fintech firms in 2024. The National Institute of Standards and Technology (NIST) defines the insider threat as:

"The threat that an insider will use her/his authorized access, wittingly or unwittingly, to do harm to the security of organizational operations and assets, individuals, other organizations, and the Nation."

High-profile cases illustrate the damage insiders can cause. In April 2022, a former Cash App employee accessed and downloaded the personal data of 8.2 million customers after their termination, leading to a class-action lawsuit against the company. Similarly, in May 2023, two ex-Tesla employees leaked confidential information, including employee and customer data, exposing 75,000 individuals and risking a potential GDPR fine of US$3.3 billion.

These examples highlight how insider threats, combined with advanced technology, create an environment where traditional security measures are no longer enough to protect African e-commerce platforms from increasingly sophisticated fraud schemes.

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How Fraud Affects African E-Commerce Businesses

Fraud takes a toll on African e-commerce businesses, hitting both their finances and operations hard. As Africa’s digital economy grows – with predictions placing the market at $940 billion by 2032 – fraud continues to be a major threat. It’s not just about immediate revenue losses; long-term damage to a company’s reputation can be equally devastating. Let’s explore how fraud impacts revenue, operations, and the challenges of implementing prevention measures.

Financial Losses and Revenue Effects

Fraud costs African e-commerce businesses in two ways: direct theft and the expenses tied to combating it.

The financial impact varies across markets. For example, in South Africa, the average scam costs $800 per incident, while Egypt sees $700 per scam. In Nigeria and Kenya, the numbers are $425 and $350 respectively. These losses are especially harsh for businesses operating on tight profit margins.

Take Nigeria, for instance. Banks reported ₦42.6 billion (approximately $26.6 million) in losses in just one quarter. Kenya, in 2023, saw $83 million vanish due to cybercrime, while Uganda reported losses of $419,486.87.

The expenses tied to fraud go beyond the stolen amounts. On average, businesses now spend $4.60 for every dollar lost to fraud – a 32% increase since 2022. This means a $1,000 fraud incident can ultimately cost a business up to $4,600 when you factor in investigation costs, chargebacks, admin work, and lost inventory.

Small and medium enterprises (SMEs) are particularly vulnerable. A striking example is Snatcher, a South African retailer with a turnover of R25M ($1.4M), which shut its doors in August 2024 after internal fraud exploited coupon-code schemes. As Dirk van Greuning, the company’s founder, explained:

"The disparity in pricing and market strategy has made it untenable for us to compete effectively, leading to unsustainable financial losses."

Operational Costs and Reputation Damage

Fraud doesn’t just drain finances – it also raises operational costs and tarnishes reputations. Over 40% of merchants in Africa rely on manual fraud prevention processes, which are labor-intensive and costly. These methods require dedicated staff, specialized training, and constant monitoring, pulling resources away from growth-focused activities.

Fraud prevention efforts can also backfire by driving customers away. For instance, 59% of U.S. merchants and 46% of Canadian merchants report higher customer churn due to fraud prevention measures. While specific data for Africa is limited, businesses here likely face similar challenges. High customer acquisition costs make retention critical, and losing trust can be a death knell.

Once customer trust is lost, it’s tough to regain. A survey revealed that 48% of micro, small, and medium enterprises (MSMEs) see a lack of trust in e-commerce marketplaces as a major growth barrier. This loss of confidence not only reduces sales but also increases the cost of attracting new customers. In East Africa, digital identity verification rejection rates are the highest on the continent at 27%. While these measures can curb fraud, they also risk alienating legitimate customers, making it even harder to build trust.

These operational and reputational challenges highlight the importance of well-thought-out fraud prevention strategies.

Fraud Prevention Methods Comparison

Given the financial and operational pressures, choosing the right fraud prevention tools is crucial. African e-commerce businesses use a variety of methods, each with its own strengths and drawbacks:

Prevention Method	Effectiveness	Implementation Cost	User Experience Impact	Best For
AI-Powered Monitoring	High – Detects patterns humans miss	High initial, low ongoing	Minimal friction when effective	Real-time transaction monitoring
Manual Review Processes	Moderate – Used by 40% of merchants	Low initial, high ongoing	High friction, slow processing	Small businesses with limited budgets
Multi-Factor Authentication	Moderate to High	Low to moderate	Moderate friction	Account security and login protection
Standard Identity Verification	Low to Moderate	Low	Low friction	Basic compliance requirements

AI-powered monitoring is highly effective, especially for scaling businesses, but it requires technical expertise and constant updates to handle evolving fraud tactics. False positives, for example, can create headaches for customer service teams. On the other hand, manual reviews might seem cost-effective at first but become unsustainable as transaction volumes increase. In fact, fraud-related costs have risen by 32% since 2022.

The challenge for African e-commerce businesses is finding the right balance between security, cost, and customer experience. With an estimated 500 million African shoppers expected to be online by 2025, investing in fraud prevention isn’t just about protecting revenue – it’s about staying competitive in a rapidly growing market.

Fraud Prevention Methods and Future Trends

Fraud costs in African e-commerce exceed $4 billion annually, highlighting the urgent need for stronger defenses. As fraud continues to evolve, companies are responding with advanced, layered security strategies to protect their operations and prepare for future challenges.

Effective Fraud Prevention Practices

The best fraud prevention strategies rely on multiple layers of security, ensuring that each layer addresses potential gaps in others. At the core of these systems is digital identity verification, which must be tailored to meet the specific challenges faced in Africa.

Biometric authentication has become a key component, especially as fraud attempts during user authentication are four times higher than during registration. This trend shows that fraudsters are increasingly targeting existing accounts instead of creating new ones. In 2024, biometric fraud averaged 16% per quarter, underscoring the need for sophisticated biometric systems. For example, Smile ID’s SmartSelfie™ technology boasts a 99.8% accuracy rate across all African skin tones, and its Enhanced SmartSelfie™ achieved 0% penetration during testing against advanced threats like deepfakes and 3D masks.

AI-powered monitoring systems add another layer by analyzing thousands of transactions in real time, identifying patterns that human reviewers might miss. Multi-factor authentication (MFA) further strengthens account security, making it much harder for fraudsters to exploit stolen credentials.

Educating customers about common fraud tactics is another effective measure. When customers know what to look for, they become active participants in preventing fraud.

For businesses operating in regions with infrastructure challenges, mobile SDKs offer a practical solution. These tools are designed to handle issues like network instability and poor-quality cameras, ensuring reliable security even in less-than-ideal conditions.

Security vs User Experience

Balancing security with user experience is a major challenge for African e-commerce businesses. Too little security opens the door to fraud, but overly complex measures can frustrate customers and drive them away.

In 2023, 48% of consumers reported encountering friction while opening online accounts, with nearly half switching to another bank as a result. Even worse, 68% abandoned their online applications for financial services entirely due to these barriers. With mobile devices accounting for 43% of all e-commerce sales in 2023, it’s essential for security measures to work smoothly across different screen sizes and network conditions.

Jennifer Singh, former director of channel partnerships at Entersekt, explains the stakes clearly:

"Consumers want transactions to happen instantaneously. If the transaction is declined for any reason, they may abandon their cart or use a different credit card to finish the transaction. This results in losses for both the merchant and issuer of the card."

Adaptive authentication is one way to address these challenges. It allows low-risk transactions to proceed with minimal friction while applying extra checks only to high-risk cases. Dynamic liveness detection is especially promising, as it can spot deepfakes and AI-generated faces by analyzing micro-movements and behavioral patterns – all without disrupting the user experience.

Transparency also plays a critical role. When customers understand why certain security measures are in place, they’re more likely to accept minor inconveniences. This is particularly important given that 71% of consumers say they would stop doing business with a company after experiencing fraud on its platform.

Preparing for New Fraud Methods

As fraud tactics grow more sophisticated, businesses must stay ahead. Generative AI has introduced entirely new threats, such as deepfake technology, which fraudsters use to create hyper-realistic fake documents and videos. In Hong Kong, for example, criminals used AI personas to impersonate executives and trick a victim into wiring $25 million. Similarly, deepfake videos have been used to impersonate high-profile African Union officials in fraudulent meetings with global leaders.

In 2024, digital banks saw fraud attempts spike to 35% of all biometric and document verification cases, while East Africa recorded the highest fraud rejection rate at 27%, partly due to poor-quality identity documents that are easily manipulated. Fraudsters are also leveraging screen display manipulation to bypass physical checks, making layered document verification – such as cross-referencing government databases and using multiple verification steps – more crucial than ever.

Dynamic liveness detection is a powerful tool against these threats, as it can counter deepfakes, AI-generated faces, and replay attacks. Companies that invest in such systems now will be better equipped to handle future challenges.

Collaboration is another key to staying ahead. Mark Straub, CEO of Smile ID, emphasizes this point:

"The future of fraud prevention lies in adaptability. While AI provides fraudsters with powerful new tools, it also helps security practitioners harness global intelligence to counter zero-day attacks and automate processes that were once manual."

To create a safer digital ecosystem, businesses must work closely with industries, governments, and tech providers. Sharing threat intelligence and best practices can help everyone stay a step ahead of emerging fraud methods.

Real-time fraud detection and continuous monitoring are no longer optional – they’re becoming essential. The ability to adapt quickly to new threats will depend on choosing the right fraud prevention partners, investing in research and development, and maintaining systems capable of rapid updates as vulnerabilities arise.

Conclusion: Fighting Fraud in African E-Commerce

Fraud is taking a massive toll on African e-commerce, with losses exceeding $4 billion annually – and the numbers are climbing as digital commerce grows across the continent. This surge is fueled by increasingly advanced fraud tactics, including the use of AI-driven deepfakes and attacks on authentication systems. Countries like Kenya and Uganda have reported particularly severe losses, highlighting the scale of the problem. These challenges not only strain businesses but also erode consumer trust in digital platforms.

Addressing this issue demands a united front. Businesses must move beyond basic security protocols and embrace more sophisticated measures, such as biometric authentication, AI-powered monitoring, and real-time fraud detection. As the Smile ID team aptly put it:

"As e-commerce continues to thrive, let’s ensure that both consumers and businesses are safeguarded against the evolving tactics of fraudsters."

Governments also have a critical role to play. Strengthening cybersecurity infrastructure and aligning legal frameworks across the continent is essential. The African Union’s Convention on Cyber Security and Personal Data Protection provides a solid foundation, but more countries need to adopt and enforce it. International cooperation among law enforcement can further amplify these efforts, showing how collective action can yield tangible results.

Technology providers are another key piece of the puzzle. They must design solutions tailored to Africa’s unique needs, complementing the layered defenses businesses are implementing. These solutions should uphold rigorous security standards while adapting to varying conditions across the region.

The stakes are high. With 71% of consumers saying they would stop doing business with a company after experiencing fraud on its platform, the costs of inaction go far beyond financial losses. They jeopardize the trust that is essential for Africa’s digital transformation.

One thing is clear: fraud prevention isn’t just an option – it’s a necessity. Delays in adopting stronger defenses, ignoring vulnerabilities, and failing to collaborate only give fraudsters more opportunities to exploit. Africa’s digital future depends on addressing these challenges head-on.

FAQs

What are the best ways for African e-commerce businesses to prevent fraud while maintaining a smooth customer experience?

To tackle fraud effectively while maintaining a smooth customer experience, e-commerce businesses in Africa can implement layered security strategies. These include tools like multi-factor authentication (MFA), address verification systems, and CVV checks, all of which help confirm user identities and safeguard transactions without causing friction.

Additionally, AI-driven fraud detection tools and advanced verification software can monitor and flag suspicious activities in real time. These technologies are designed to reduce false positives, so genuine customers can shop without unnecessary interruptions, while fraudulent actions are intercepted.

By combining strong security measures with user-friendly practices, businesses can safeguard their operations, earn customer trust, and strengthen loyalty.

How are AI and deepfake technologies influencing fraud in African e-commerce, and what steps can businesses take to protect themselves?

The emergence of AI and deepfake technologies has brought new challenges to African e-commerce, offering scammers sophisticated ways to commit fraud. These tools enable the creation of highly convincing fake identities, voice cloning, and fraudulent websites, all of which contribute to an increased risk of financial losses and identity theft.

To address these growing threats, businesses can leverage AI-driven fraud detection tools capable of spotting suspicious activities in real time. Using machine learning systems for continuous monitoring and strengthening digital identity verification processes can further minimize risks. Taking a proactive approach and investing in advanced security measures is crucial to protecting both businesses and their customers in this rapidly changing environment.

Why are small and medium-sized businesses (SMBs) in African e-commerce more prone to fraud, and how can they protect themselves?

Small and medium-sized businesses (SMBs) in African e-commerce often face a higher risk of fraud. Limited resources and a lack of cybersecurity expertise leave them more vulnerable to cyberattacks. Without the necessary tools or dedicated teams, these businesses become easier targets for fraudsters. On top of that, many SMBs operate without structured strategies for fraud prevention, which only increases their exposure.

However, there are practical steps SMBs can take to protect themselves:

Use managed cybersecurity services to gain professional-level protection without needing an in-house team.
Upgrade digital security protocols, like enabling two-factor authentication and ensuring payment gateways are secure.
Adopt real-time fraud detection systems to quickly identify and address threats as they arise.

Focusing on these actions can help SMBs reduce their risk and create safer e-commerce environments for their customers.