SHENZHEN, Sept. [XX] — As Chinese toy exporters expand globally, a growing threat looms over their bottom lines: escalating payment fraud and disputes. While China Export & Credit Insurance Corporation (Sinosure) reported a 13.5% year-on-year increase in insurance coverage) to $565.6 billion in the first half of 2025, industry data reveals a darker reality: 75% of consumers in the U.S. and UK initiated chargebacks in 2024, hitting record highs. From AI-generated fake accounts to Letter of Credit fraud and regional payment delays, toy exporters face unprecedented payment collection risks that demand urgent attention. This report dissects emerging fraud patterns and provides actionable safeguards for navigating the treacherous 2025 payment landscape.
The Evolving Fraud Landscape: AI-Powered Schemes and Regional Risks
The most alarming development in cross-border payment fraud is the rapid adoption of AI technologies by fraudsters. Criminal groups are increasingly using large language models like FraudGPT and WormGPT to generate sophisticated phishing emails, create fake buyer profiles, and bypass security verification systems, according to Riskified's 2024 Global Insights Report on Chargeback Challenges. These AI tools enable fraudsters to establish seemingly legitimate "robot accounts" that can successfully complete purchases before disappearing with the goods, leaving exporters unpaid.
"Fraudsters using AI can create hundreds of fake identities that look real enough to pass basic verification checks," explains Tasneen Padiath, APAC Director at Riskified, a leading fraud prevention firm. "In the toy industry, where seasonal demand spikes create pressure to fulfill orders quickly, these fake accounts are causing significant losses—sometimes tens of thousands of dollars per incident."
Regional variations in fraud patterns complicate risk management further. In Costa Rica, a key market for Chinese toy exports, currency fluctuations and economic instability have led to rising instances of delayed payments and port cargo accumulation as buyers refuse to take delivery when exchange rates turn unfavorable, according to the Zhejiang Provincial Council for the Promotion of International Trade. This has increased storage and transportation costs for exporters by an average of 12-15% in 2025.
Latin American markets present different challenges, with fraudsters exploiting real-time transfer systems prevalent in the region. By stealing consumer payment credentials and using AI to forge identity details, criminals have increased fraudulent transactions targeting toy shipments—particularly high-value items like collectible figures and electronic toys that retain resale value. Emerging markets with less developed banking infrastructure are most vulnerable, experiencing up to 6% revenue loss from payment fraud compared to the global average of 3%, Riskified data shows.
Traditional fraud methods persist alongside these new threats. Letters of credit (L/C) fraud remains a concern, with fraudsters creating falsified documents or modifying shipping details to divert goods. A Guangdong-based toy exporter specializing in educational products reported losing $400,000 in early 2025 after a buyer in Southeast Asia presented forged L/C documents that appeared authentic until the shipment was already en route.
Case Studies: How Toy Exporters Are Being Targeted
Recent incidents highlight the diverse risks facing toy exporters. In March 2025, a medium-sized manufacturer in Yiwu specializing in plush toys received a large order from a newly established company in Brazil for $250,000 worth of products. The buyer insisted on using a lesser-known local payment method and provided seemingly valid identity verification documents. After shipping the order, the exporter discovered the company was fictitious—its identity documents generated by AI—and the payment had been made with stolen credit card information. By the time the chargeback was initiated, the goods had already been distributed through informal channels in Brazil.
Another case involved a Hong Kong-based exporter of action figures that fell victim to a sophisticated L/C fraud in Europe. The buyer, posing as a subsidiary of a well-known retail chain, provided an L/C through a small Eastern European bank. The documents appeared legitimate, but upon closer inspection after shipment, discrepancies were found in the bank's authorization codes. By then, the toys—featuring popular animated characters—had been delivered to an unauthorized warehouse and sold on secondary markets.
Perhaps most concerning are the systemic chargebacks affecting toy sellers in major markets. A Shenzhen toy company supplying Amazon's European market reported a 300% increase in "item not received" claims in Q2 2025, despite using tracked shipping services. Investigation revealed that fraudsters were using AI to generate convincing delivery address changes and then claiming non-delivery. The company estimates these fraudulent chargebacks cost them $80,000 in lost goods and processing fees in just three months.
Risk Mitigation Strategies: Practical Measures for Exporters
To combat these evolving threats, toy exporters are adopting multi-layered risk management approaches that combine technology, due diligence, and strategic partnerships.
Enhanced Due Diligence and Verification
Leading exporters now implement rigorous buyer verification protocols before accepting orders. This includes verifying company registrations through local chambers of commerce, checking credit histories via services like Dun & Bradstreet, and requiring additional documentation for first-time buyers. "We now conduct video calls with new clients to verify their business premises and insist on partial pre-payment for orders over $50,000," says a risk manager at a major Guangdong toy manufacturer. "These steps have reduced our fraud losses by 40% this year."
For online transactions, implementing AI-powered identity verification tools has become essential. Solutions like Riskified's fraud detection system use machine learning to analyze hundreds of data points—from IP addresses to browsing patterns—to identify suspicious transactions before goods are shipped. "Our AI models can detect 95% of AI-generated fake accounts by analyzing subtle inconsistencies in their behavior patterns," Padiath explains.
Strategic Payment Method Selection
Choosing the right payment method based on market and buyer profile significantly reduces risk. For high-value transactions in less familiar markets, many exporters now insist on irrevocable L/Cs confirmed by reputable international banks rather than local institutions. Medium-sized orders often use escrow services like Alibaba's Trade Assurance, which hold funds until delivery is confirmed.
In emerging markets, partnering with specialized cross-border payment providers offers better protection than traditional banking channels. Companies like XTransfer, which focuses on B2B foreign trade payments, provide local collection accounts in target markets, reducing reliance on intermediate banks and offering better fraud monitoring. "Using local collection accounts in Southeast Asia has cut our payment delays by 70% and reduced fraud incidents," notes a toy exporter operating in Indonesia and Vietnam.
Insurance and Financial Safeguards
Increasing numbers of toy exporters are turning to export credit insurance to protect against non-payment risks. Sinosure's 2025 data shows that its short-term export credit insurance, which covers commercial and political risks, supported $140.7 billion in toy exports in the first half of the year, a 5% increase from the previous period. This insurance typically covers 80-90% of losses from buyer insolvency, protracted default, or political events.
For recurring transactions, factoring services provide another layer of protection by purchasing accounts receivable at a discount and assuming the collection risk. This not only reduces exposure to bad debt but also improves cash flow—a critical advantage in the capital-intensive toy industry with its seasonal production cycles.
Future-Proofing Against Emerging Threats
As fraudsters adopt more sophisticated AI tools, exporters must continuously update their defenses. Industry experts recommend regular staff training on emerging fraud tactics, particularly those involving AI-generated content. "Many of our clients now run quarterly simulations where teams practice identifying AI-fabricated documents and fake buyer profiles," says a risk consultant specializing in toy exports.
Collaboration within the industry is also growing. Trade associations like the China Toy & Juvenile Products Association have established shared databases of fraudulent buyers and suspicious transactions, enabling members to flag risks collectively. Meanwhile, partnerships between exporters and technology firms are yielding more specialized solutions, such as blockchain-based systems for tracking shipments and verifying document authenticity in real-time.
Looking ahead, the most resilient toy exporters will be those that balance growth with caution. "Expanding into new markets is essential, but not at the cost of inadequate risk protection," advises an industry analyst at Euromonitor. "The successful exporters of 2025 will be those that integrate fraud prevention into their core business strategies, using a combination of technology, insurance, and strategic payment methods to safeguard their revenues."
As Chinese toy brands gain global recognition—particularly those leveraging popular animation IPs—the need to protect these valuable exports from payment fraud becomes even more critical. By implementing robust verification processes, selecting appropriate payment channels, and utilizing available financial tools, exporters can navigate the complex 2025 risk landscape while continuing to build their international presence.
Post time: Sep-20-2025
