AI and Fraud-as-a-Service Are Fueling Retail Fraud: Here’s How You Can Mitigate Risk In Your Business

Joy Henry, Executive Vice President, Americas

Retail and eCommerce companies face mounting identity-fraud-related losses, with a recent survey by LexisNexis indicating that every dollar lost to fraud costs US retailers $4.61 on average. While retail fraud is often driven by external actors using fake credentials during account setup or checkout, insider threats — such as applicant and employee fraud — are becoming a serious and costly concern.  

One of the most concerning trends is the surge in synthetic identity fraud, comprising about 30% of all identity fraud cases as of 202530% of all identity fraud cases by 2025e. The fastest growing type of fraud globally, this scheme involves blending a mix of real and fictitious personal information to fabricate a new identity. The process is often enabled by criminals obtaining legitimate Social Security Numbers (SSNs), frequently from deceased or homeless individuals. 

This trend has grown so significantly that an entire underground industry known as fraud-as-a-service has emerged. These operations sell false identity packages and provide end-to-end support for fraudsters, including instructions on how to use these identities to open new credit lines, sign up for an account or, in some cases, apply for a job. 

The eCommerce industry, which relies heavily on a remote and global workforce to operate its websites, applications, and call centers, is particularly vulnerable to identity fraud. Since recruiters rarely meet applicants face-to-face, it’s easier than ever for fraudsters to impersonate someone else to get a foot in the door.  

Emerging AI and deepfake technologies now allow fake applicants to bypass the video interview process or even pass via video as someone else, while sophisticated tools can generate  realistic counterfeit IDs that are difficult to detect. Gartner even predicts that 1 in 4 job applicants could be fake in 2028 globally. 

Fake applicants have a lot to gain from using a fraudulent identity. Some may be hiding a criminal record that would disqualify them from public-facing roles or positions involving sensitive data. Some could be selling their services as a proxy interviewer, landing and then selling jobs to applicants who may not even be located in the US. Others could be planning to steal data or assets through insider fraud, a crime that costs the retail industry an average of $48,000 per incident, based on a recent study. 

Digital Identity: How Retailers Can Fight Back 

To address emerging identity fraud threats and mitigate against the threat of fake applicants, background screening providers are introducing digital identity solutions for the retail industry. These tools use AI and biometrics to spot common red flags to find discrepancies in the identity information submitted. 

Below are some common questions and concerns retailers might have about digital identity. 

Isn’t digital identity already included in a background check? 

It’s a common misconception among retail HR professionals that a standard background check typically includes digital identity. In reality, US background checks do not include identity solutions in the background check. While I-9 forms require the hiring manager to review ID at onboarding, this step may come too late — and store managers often lack the tools or training to detect high-quality fakes. Adding a digital identity solution ahead of the background check remains the most effective way for retailers mitigate the risk of identity fraud. 

We hire high volumes of applicants. How feasible is it for us to implement digital identity on a large scale? 

Digital identity is designed to scale. It’s a cost-effective, flexible solution that can be rolled out across high-volume hiring environments and easily tailored to meet the needs of busy retail operations.  

Will digital identity slow us down? 

Not at all. First Advantage’s digital identity solution is fast, mobile-friendly, and seamlessly integrates with your hiring workflow. It verifies identity upfront — without adding delays to your time-to-hire.  Most applicants’ identity results are verified in ~90 seconds or less on average.  

Some of our applicants don’t have a computer. Will they be able to confirm their identity? 

Yes. Applicants can complete the entire process on their mobile phone with no desktop or laptop required. It’s fully mobile-enabled from start to finish, making it ideal for frontline retail roles.  

How does digital identity work? 

Digital identity tools typically rely on a combination of personal and biometric data as well as AI to confirm an applicant’s identity. First Advantage’s Global Digital Identity is a robust, multilayered solution that provides the following methods: 

• ID Document Review: Our technology compares candidates’ IDs to a database of hundreds of standard government-issue documents in order to verify its authenticity.  
• Biometric Data: Validate an applicant’s biographic information, such as name, address, and other identifying information, against credit bureau records.  
• Liveness Detection with Facial Recognition & Biometric Matching: Candidates are asked to provide a real-time selfie for validation, which is matched to their government photo ID. Dynamic facial recognition and movement analysis tools are used to help counteract deep fakes.  
• Telecom and Device: Device- and telecom-based data, including device location, SSN, IP address, identity risk score and more are used to confirm candidates’ identity. 

Global Digital Identity is completed before the background check; this is important to avoid searching unverified personal data and to uncover more criminal records and other potentially relevant details. 

Closing Thoughts: Why Retailers Should Adopt Digital Identity 

As identity fraud becomes more advanced and widespread, especially with the rise of AI and deepfake technologies, retailers can’t afford to rely on traditional hiring practices alone. Integrating digital identity verification into your hiring process is no longer a nice-to-have — it’s an important safeguard against fake applicants, insider threats, and operational disruption.  

Digital identity solutions offer a scalable, mobile-friendly, and cost-effective way to check who your applicants really are before they ever set foot in your store or access your systems. By investing in these tools today, retailers can protect their brand, reduce risk, and accelerate hiring without compromise.  

Interested in adding digital identity to protect yourself from identity and insider fraud? We can help you take your retail screening program to the next level. Contact our experts to learn more.