Midjourney, Stable Diffusion, and DALL-E now pose a new retail fraud risk: fake return photos

Since 2022, image generators like Midjourney, Stability AI’s Stable Diffusion, and OpenAI’s DALL-E have pushed photorealistic image creation into the mainstream. They’ve brought real productivity gains, but they’ve also made it far easier to manufacture fake evidence for retail returns, refunds, chargebacks, and friendly fraud.

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Give one of these tools a text prompt and it can produce convincing photos of damaged products, altered packaging shots, fake receipts, shipping labels, and other kinds of “proof” used in returns, refunds, chargebacks, and friendly fraud. Merchants say the abuse is climbing: 57% report more refund or policy abuse, 69% are already seeing fraud aided by these tools, 87% expect more of it, and some estimates put 3 in 10 retail fraud attempts in this category.

Organized fraud rings can run this play across accounts and merchants. Regular consumers can do it too, tailoring images to a specific product, merchant, or claim in seconds instead of reusing sloppy edits.

If you handle retail returns, take that as a warning. Only 3% of retailers say they feel ready, so merchants are turning to machine-learning checks across transactions, accounts, and return histories because image-only verification isn’t holding up.

These image-generation tools are easy to access online through services like Midjourney, Stability AI’s Stable Diffusion, and OpenAI’s DALL-E. Research covering more than 4 million artworks found 25% higher creative productivity and 50% higher perceived value for lower-cost product visuals, faster mockups, and personalized ads. At the same time, the same tools are making deception cheaper, faster, and harder to spot.