Rainbow uses Signifyd's anti-fraud software and AI to detect and flag potential fraud and allow other orders through.

Distinguishing legitimate orders from fraudulent ones is a major problem in ecommerce, says David Cost, vice president of ecommerce and marketing at Rainbow Apparel. The clothing retailer has used anti-fraud software Signifyd for about two years. Cost says it’s been key to accepting the right orders.

Rainbow Shops rank No. 710 in the Top 1000. The database is Digital Commerce 360’s ranking of the largest North American online retailers by web sales. 

Detecting fraud requires sophistication

Rainbow Apparel used to flag suspected fraudulent orders manually, Cost says. Ten years ago, the retailer was rejecting about 2% of all orders. Today, Rainbow only rejects about one-half of a percent of orders.

The goal is to only reject legitimately fraudulent orders.

“There’s no other way for us to be able to accomplish that goal,” Cost says. It requires automation and AI on a large scale.


For example, Rainbow has a large customer base in the Caribbean, but it doesn’t ship there. So a customer from Jamaica will make an order with their Jamaican billing address, but the order will ship to someone in Florida or Texas who then bulk ships several orders to the Caribbean, Cost says. That’s exactly the type of situation that can be difficult to determine if it’s fraud or not, he said. 

“AI over time has gotten so good that … we’re able to grab all that business that we can without really any downside of fraud,” Cost said.

For Rainbow, that AI expertise comes from Signifyd’s wide reach. As a vendor to 116 retailers in the Top 1000, Signifyd has access to about 450 million digital wallets, chief business officer Indy Guha said. That means it has access to data about consumer identities based on purchases from other retailers.

“We don’t have to guess if someone’s identity is breached. Once it’s compromised, that’s compromised everywhere in our network,” Guha said. 


Letting through legitimate customers is the biggest challenge

Guha and Cost emphasized the importance of allowing legitimate customers to make purchases despite fraud protections.

Non-fraudulent purchases from lower-income shoppers are more likely to face issues at checkout, Cost said. Rainbow Apparel primarily serves customers “in the lower half of the income spectrum,” he says. “Like a lot of other things in life, they get discriminated against, you know, more than most.” 

For example, sometimes a bank network will tell Rainbow to reject an order for lack of funds, when the customer actually does have money available on their credit limit, Cost said. Signifyd has relationships with those companies, and brought the problem to Cost’s attention. Every rejected order is reviewed by a member of Rainbow’s team, and can be resubmitted to Signifyd for a new check. Rainbow overrides Signifyd’s decisions only “a handful of times a week,” he said.


“Every day, it gets more expensive to acquire customers,” Cost said. “There’s no quicker way to lose a customer or squander marketing efforts than, you know, rejecting somebody’s order that’s legit because you think it’s fraud.”

Fraud more broadly

Retailers are adopting new measures to fight ecommerce fraud, according to the 2023 Global Fraud and Payments Report from the Merchants Risk Council. Just over one-third of 1,072 retailers surveyed reported instances of “friendly fraud,” meaning customers dispute seemingly legitimate purchases through their credit cards. 

Ecommerce retailers spend an average of about 10% of revenue managing payment fraud. The report says that number has been stable for the last three years. It seems to be paying off. The percentage of ecommerce revenue lost to fraud globally is down from 3.6% in 2022 to 2.9% in 2023, per the report. The order rejection rate for potential fraud was also down, from 3.4% to 2.7%. 

Fraud, and the orders rejected as potential fraud, still represent a big problem for the industry. Signifyd’s State of Fraud Report for 2023 found that for every $100 in fraudulent orders, retailers lose $207. That loss comes from the cost of processing, chargeback fees, fighting claims, and other charges. Global retailers turned down $24 billion of good orders for fear of fraud in the 2022 holiday season, according to the report.


Fraud doesn’t impact every industry equally. Signifyd found fraud attempts in 2023 are up in collectibles, luxury goods, and apparel. They were down in beauty, business supplies, and grocery.

Sign up

Stay on top of the latest developments in the ecommerce industry. Sign up for a complimentary subscription to Digital Commerce 360 Retail News.

Follow us on LinkedInTwitter and Facebook. Be the first to know when Digital Commerce 360 publishes news content.