National Retail Federation and Appriss Retail estimate that fraudulent returns cost U.S. merchants $25.3 billion per year as of January 2021. Refund abuse happens when a consumer puts an order, gets the products, and then falsely claims to the merchant that they have not received the package. This is also known as INR or MNR claims. If your ROI is negatively impacted because of refund fraud, you can protect your business from fraudsters by implementing a refund abuse protection plan.
Bad actors may more easily claim a shipment was never received since online shopping is so popular and so many delivery businesses are still using contactless delivery. Entrepreneurs must be aware of the difficulties posed by this form of abuse as it continues to spread. In this article, we have shared all the important points that will help you protect your business from refund fraud.
Implications of Returns on Refund Fraud:
Following are some of the possible downsides of a weak return policy on refund fraud:
- Inventory that might have been sold to genuine consumers is lost as a result of abusive returns. According to a report, almost $5 million in income is lost each year as a result of merchants abusing the return policy.
- Costs connected with processing, shipping, restocking, etc. are factored into a merchant’s bottom line when they deal with abusive returns.
- Returned goods abuse may put retailers at a competitive disadvantage, making it difficult for them to provide their customers with the best possible return policies.
How to Stop Refund Fraud Abuse?
To commit refund abuse, one must return an item to a shop despite the fact that the item is not eligible for a refund. Refunding items that weren’t theirs or are being passed off as refundable by the fraudster amounts to theft from the store. As a rule of thumb, most instances of refund policy misuse are motivated by malice.
It’s tough to put a halt to refund fraud. Customers may be put off by more stringent return policies, which might lead to a decrease in sales. It’s a risk that many businesses can’t afford to take, particularly when they’re expanding. Not all bad-behaving clients need to be barred, and treating them all as fraudsters would be unfair. To prevent being a victim of retaliatory abuse, you must follow a few fundamental rules:
- Maintain an easy-to-understand return policy.
- Limit the number of returns accepted.
- High-ticket things, like cars, should be taxed.
- With a receipt, only cash returns are allowed.
- Return items for store credit instead of cashback to save money. However, you should be cautious while changing your return policy. A complex or restricted return policy may turn off customers. As a business, you must balance avoiding return abuse with a customer-friendly return policy.
- Protect your business from fraudsters by implementing a refund abuse protection plan.
Refunds Abuse Protection is meant to detect and stop various types of claims of abuse. Using this system, retailers may quickly and simply determine if a refund request is authentic or not, in real-time. Customers who are eligible for a refund may do so without any additional delays or friction.