From Online Transactions to Portfolio Risk: How E-Commerce Fuels Fraud
This week the Commercial Pulse report dives into the growing problem of commercial forms of fraud.
In some ways, fraud can be seen as a cost of doing business, but the nature of the threat is changing. Today’s fraud environment is larger, faster, and more scalable than at any point in recent history. For Chief Risk Officers and commercial lenders, the challenge is no longer simply preventing isolated incidents. It is understanding how evolving fraud patterns can affect portfolio performance, underwriting decisions, operational costs, and long-term risk exposure.
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According to recent industry estimates, fraud and scam losses reached $38 billion in 2025, impacting approximately 36 million victims across the United States. While these headline figures are concerning, they only tell part of the story. The more important question for risk leaders is what these trends signal about future portfolio performance and whether existing fraud controls are prepared for what comes next.
Digital Growth Has Expanded the Attack Surface
One of the most significant drivers behind the current fraud environment is the continued expansion of digital commerce.
E-commerce now accounts for nearly 17% of total U.S. retail sales, exceeding even peak pandemic levels. The digital transformation of commerce has delivered meaningful efficiencies and growth opportunities, but it has also dramatically expanded the amount of personal and business information available online.
Every digital interaction creates data. When that data is exposed through breaches, phishing attacks, account compromises, or other forms of cybercrime, it becomes fuel for fraud. Stolen information can be leveraged to create synthetic identities, establish fictitious businesses, facilitate account takeover attempts, and support increasingly sophisticated fraud schemes.
For lenders, this means that fraud risk is no longer confined to isolated bad actors. The scale of available compromised information is enabling fraud operations to become more industrialized and difficult to detect through traditional methods.
The Dark Web Has Become a Leading Indicator
Many organizations focus on fraud reports as a measure of current risk. However, some of the most valuable insights may come from indicators that emerge well before losses appear in portfolio performance. Dark web activity is one such indicator.
Experian’s Dark Web Monitoring data identified more than 1.4 billion stolen records during the first quarter of 2026 alone. This sustained volume of compromised information suggests that fraudsters continue to have access to a large and growing inventory of credentials and personal information.
For risk leaders, the implication is straightforward: a growing supply of compromised records creates the conditions for future fraud attempts. By the time fraud appears in application activity, payment performance, or loss reporting, the underlying data exposure has often existed for months.
Monitoring dark web trends can provide an early warning signal that helps organizations prepare for increases in synthetic identity activity, business impersonation attempts, and account takeover events.
First-Party Fraud Is Reaccelerating
While external fraud schemes often receive the most attention, Experian’s commercial data suggests that first-party fraud deserves equal scrutiny.
First-party fraud occurs when an applicant intentionally misrepresents information or obtains credit without the intention of meeting repayment obligations. Unlike traditional third-party fraud, these cases often involve legitimate identities, making detection significantly more challenging.
After a relatively stable period between late 2022 and early 2024, first-party fraud has been steadily increasing since mid-2024.
This trend matters because first-party fraud often appears similar to conventional credit deterioration in its earliest stages. Accounts may initially perform normally before rapidly transitioning into delinquency or charge-off status. As a result, organizations that rely exclusively on traditional credit risk models may underestimate the true level of fraud-related losses within their portfolios.
Business leases experienced some of the highest first-party fraud incidence rates during 2025, but the trend is not isolated to a single product category. Elevated fraud activity has been observed across term loans, lines of credit, commercial cards, and leasing products.
For CROs, this raises an important question: how much of today’s portfolio deterioration is actually fraud-related rather than purely credit-driven?
The AI Gap Is Creating New Risk
Artificial intelligence is reshaping both sides of the fraud equation.
On one hand, fraudsters are leveraging AI to create more convincing synthetic identities, automate attacks, generate fraudulent documentation, and scale operations more efficiently than ever before.
On the other hand, AI-powered analytics offer organizations powerful new tools for fraud detection, behavioral monitoring, and anomaly identification.
The challenge is that adoption has not kept pace with awareness.
Recent research found that 72% of businesses expect AI-generated fraud and deepfakes to become a major operational challenge within the next two years. Yet only 37% report actively using AI-enabled fraud prevention capabilities today.
This disconnect represents one of the most significant vulnerabilities in the current fraud landscape.
Many organizations continue to rely heavily on traditional authentication methods such as passwords, PINs, security questions, and CAPTCHA controls. While these tools remain useful, they were not designed to address today’s increasingly sophisticated fraud tactics.
Organizations that delay modernization efforts may find themselves operating with controls that were built for a fundamentally different threat environment.
Three Indicators Every CRO Should Monitor
As fraud risk continues to evolve, three areas deserve particular attention.
Looking Ahead
Fraud is no longer simply an operational issue. It has become a strategic risk management challenge that intersects with credit performance, customer experience, regulatory expectations, and enterprise resilience.
The organizations that succeed in this environment will not be those that simply react to fraud events. They will be the ones that identify leading indicators earlier, integrate fraud intelligence across the customer lifecycle, and modernize their risk frameworks before losses force the issue.
For CROs, the question is no longer whether fraud risk is increasing. The question is whether existing controls, analytics, and governance structures are evolving quickly enough to keep pace.
Learn more
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- ✔ Connect with your Experian account team to explore how data-driven insights can help your business grow.
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The U.S. small business landscape is undergoing a structural transformation — and commercial lenders may need to rethink what a “small business borrower” looks like. According to Experian’s May 26th, 2026 Commercial Pulse Report, new business formations remain at historically elevated levels, averaging approximately 450,000 per month since the pandemic. That pace represents a 54% increase compared to pre-pandemic averages from 2018 and 2019. Watch the Commercial Pulse Update According to Experian’s latest Commercial Pulse Report, new business formations remain at historically elevated levels, averaging approximately 450,000 per month since the pandemic. That pace represents a 54% increase compared to pre-pandemic averages from 2018 and 2019. But perhaps more importantly, the composition of those businesses has changed dramatically. In early 2026, approximately 93% of newly formed businesses were sole proprietorships, up from 85% in 2018. Many of these businesses have no employees, limited operating history, and different borrowing behaviors than the traditional small businesses lenders historically underwrote. That shift is creating a fundamentally different commercial credit environment. A Different Kind of Small Business Owner Historically, many small business lending models were designed around businesses with employees, established operations, recurring revenue streams, and longer credit histories. Today’s wave of new businesses often looks very different. Many newer firms are being launched by individuals pursuing consulting work, freelance opportunities, side businesses, creator-economy income streams, or post-retirement self-employment. These businesses may operate leaner, carry lower fixed costs, and rely more heavily on revolving credit products rather than traditional financing structures. In many cases, the business owner and the business itself are financially intertwined. That evolution matters because underwriting a sole proprietor is not the same as underwriting a mature operating company. The rise in sole proprietorships is being driven by several long-term labor force and demographic trends now reshaping the U.S. economy. Demographic Shifts Are Driving Entrepreneurship One of the most important forces behind the surge in sole proprietorships is the aging U.S. population. By 2050, individuals aged 55 and older are projected to represent nearly 40% of the total U.S. population. At the same time, Americans are increasingly working later in life. Labor force participation among older workers has steadily increased over the past two decades, while participation among younger workers has trended lower. Retirement itself is also evolving. Many retirees are no longer fully exiting the workforce. Instead, they are remaining economically active through part-time consulting, contract work, side businesses, and self-employment arrangements. According to research highlighted in Experian’s report, 59% of workers expect to continue working during retirement, while 61% of recent retirees express interest in continued employment. These trends are contributing to a growing segment of “microbusinesses” — businesses with few or no employees operating primarily around the skills, experience, or services of an individual owner. At the same time, broader workplace dynamics are also influencing entrepreneurial activity. Employee Engagement Is Falling According to Gallup, employee engagement in the U.S. and Canada declined to 31% in 2025, down from post-pandemic highs. Gallup estimates that low engagement costs the global economy nearly $10 trillion in lost productivity. Younger workers in particular appear increasingly affected by workplace stress, burnout, and changing expectations around flexibility and career mobility. As a result, more individuals may be pursuing alternative work arrangements, independent income streams, or self-employment opportunities. The side-hustle economy continues to expand as well. A recent PYMNTS study found that nearly 20% of workers engaged in regular side work during the previous six months. Collectively, these labor force dynamics are reshaping not only how Americans work, but also how small businesses are formed, financed, and evaluated from a credit perspective. Commercial Credit Usage Looks Different Experian data shows meaningful differences in how smaller and larger businesses use commercial credit. Smaller businesses and sole proprietors rely more heavily on commercial credit cards, while larger firms tend to utilize a broader mix of leases, lines of credit, and term loans. Businesses with four or fewer employees received average commercial card credit lines of roughly $8,900 in 2025. By comparison, businesses with more than 100 employees averaged approximately $29,500 in new commercial card credit lines. Even when loan origination rates appear similar across business sizes, loan amounts differ substantially. Businesses with fewer than four employees averaged approximately $119,000 in term loan originations, while larger businesses averaged closer to $268,000. Risk performance differs as well. Larger firms generally continue to demonstrate lower delinquency rates and stronger commercial credit scores, reflecting greater operational scale, more established financial histories, and broader access to capital. Why Risk Models May Need to Evolve For lenders, these shifts present both opportunity and complexity. The surge in new business formation creates potential growth opportunities across commercial credit markets. However, many of today’s borrowers may not fit historical underwriting assumptions. Traditional business risk models often relied heavily on factors associated with mature operating businesses — payroll size, years in business, trade depth, and established commercial borrowing history. Today’s newer firms may instead require a more blended view of risk that incorporates both commercial and consumer-level behaviors, cash flow dynamics, and alternative indicators of financial stability. As sole proprietors and microbusinesses continue to account for a growing share of the small business economy, lenders may need to remain agile in balancing portfolio growth with disciplined underwriting and risk management strategies. The definition of “small business” is evolving — and commercial risk models may need to evolve alongside it. Learn more ✔ Visit our Commercial Insights Hub for in-depth reports and expert analysis. ✔ Subscribe to our YouTube channel for regular updates on small business trends. ✔ Connect with your Experian account team to explore how data-driven insights can help your business grow. Download the Commercial Pulse Report Visit Commercial Insights Hub Related Posts
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