How UK Retailers Can Use AI to Stay Ahead of Holiday Fraud

Peak shopping seasons are defined by opportunity. For consumers, they promise discounts, convenience, and access to in-demand products. For retailers, they represent the most critical revenue window of the year, with shoppers spending billions during the busy ‘golden quarter’ between November and January.   

They also create ideal conditions for fraud. 

As we look to 2026, online sales are poised to continue growing. While the scale is a boon for UK merchants, it also gives fraudsters something they value just as much: camouflage.  

Fraud doesn’t spike despite peak shopping. It spikes because of it.  

The growing use of AI across the UK shopping ecosystem has added another layer of complexity. AI-powered tools are now commonly used by consumers to compare prices, discover gifts, and complete purchases faster. At the same time, fraudsters are using similar technologies to automate and scale attacks. What helps legitimate shoppers move faster also helps fraudsters blend in. For merchants, it means unprecedented transaction volumes that make it harder than ever to accurately detect fraud; for fraudsters, it’s a golden ticket.  

To beat fraud and make the most of peak shopping seasons in 2026, merchants should reflect on the 2025 season to understand the pain points and identify the right tools to overcome them. 

The Challenges of Identifying Fraud 

Holiday shopping fundamentally changes consumer behavior in the UK. Shoppers place orders more frequently, ship gifts to multiple addresses, rush purchases ahead of delivery cutoffs, and explore new retailers. From a fraud detection standpoint, these behaviours should be red flags.  

The result is a high-noise environment, marked by spikes in password resets, account updates, login attempts, and overall traffic, creating new opportunities for fraudsters to exploit trusted customer accounts and stored payment details. 

Common fraud tactics during UK peak shopping periods include: 

• Account takeovers where compromised customer accounts are used to place high-value orders. 

• Synthetic and stolen identities, particularly among first-time shoppers. 

• Shipping address obfuscation, including manipulated or conflicting address fields designed to evade detection. 

Faced with these risks, merchants are often forced into a difficult trade-off: either loosen approval thresholds to avoid blocking genuine customers or tighten controls and risk turning away good business at the worst possible time.  

The Duality of AI 

AI is now a double-edged sword in the UK shopping ecosystem. 

Consumers increasingly rely on AI-powered tools to assist with gift discovery, price comparison, and purchase decisions, while fraudsters are using AI-driven techniques to scale attacks more efficiently. 

Merchants now have an opportunity to turn that same technology into a decisive advantage for the 2026 shopping season and beyond. 

Modern AI-powered fraud prevention enables real-time analysis of transactions within their full behavioural context. Instead of relying on static rules or isolated signals, AI models assess how each transaction fits within broader patterns -helping distinguish a legitimate customer using an AI shopping assistant from a malicious bot executing fraud at scale. 

But because fraud rings rarely target a single retailer, network intelligence is a crucial aspect of these fraud detection tools. By sharing data across merchant networks, UK businesses can spot attackers who move laterally between brands. Even when a customer appears new to a specific retailer, their transactions are often connected to activity elsewhere in the network. 

This visibility can reduce fraud detection timelines from 10–14 days to as little as 24–48 hours, enabling merchants to limit losses before attacks escalate. 

Protecting the Customer Experience 

Fraud prevention is about protecting good customers as much as it is about blocking bad actors. 

False declines – where a legitimate customer is denied on suspicion of fraudulent activity – carry a heavy cost for UK retailers. New customers are especially vulnerable to false declines as their lack of purchase history makes them more likely to be flagged. Why is that a problem? Because one in three new customers who experiences a false decline will abandon the merchant entirely, often turning to a competitor during the same shopping session. In other words, false declines eliminate loyalty, deterring new customers from becoming return customers. 

AI helps merchants strike the right balance by enabling customer segmentation at checkout and ensuring that legitimate UK customers aren’t blocked while fraudulent activity is detected in real time. Legitimate, low-risk customers can move frictionlessly through the purchase journey, while higher-risk transactions are routed through additional verification steps -without disrupting the broader customer experience. 

Key Strategies for UK Merchants in 2026 

To manage fraud effectively during peak shopping periods, UK retailers should focus on three core principles in the new year: 

1. Invest in AI-driven fraud prevention 

Merchants should prioritize solutions that support dynamic risk assessment, behavioral analysis, and real-time decision-making at scale. 

2. Ensure scalability during peak demand 

Fraud systems must perform reliably especially during traffic surges such as Black Friday and Christmas, when transaction volumes spike dramatically and manual review is impractical. 

3. Monitor risk beyond checkout 

Fraud doesn’t end with payment approval. UK merchants must also address “downstream abuse” – return fraud, chargebacks, and “item not received” claims, which often rise in the weeks following peak sales. 

Using powerful tools such as these, merchants can go into peak shopping periods confident that they can maintain impressive approval rates even amid record transaction volumes. 

The Future of Fraud Prevention 

As peak shopping periods continue to expand, fraud will remain an unavoidable challenge for UK retailers. But it doesn’t have to be a growth limiter. 

AI offers a path forward, not just as a defensive tool, but as a strategic enabler that protects revenue, preserves customer trust, and supports growth during the moments that matter most. For UK merchants navigating the pressures of holiday commerce, the message is clear: AI is the future of fraud. It’s also the future of fraud prevention.