Fraudulent returns and refunds in e-commerce are increasing exponentially

More and more consumers are abusing return and refund policies, causing brands to lose millions in revenue every year.

Tricks and tips spread through social media give this activity an air of acceptability, but ultimately it is the legitimate customers and businesses who pay the price.

To make matters worse, cybercriminals are now offering “refunds as a service,” with more and more consumers hiring them to claim fraudulent refunds on their behalf in exchange for a share of the proceeds.

These criminals manipulate companies into issuing refunds by using third-party services to falsify tracking and return information.

“Refund fraud is far from friendly; it’s digital shoplifting,” says Grant Shipway, Senior Operational Risk Manager at River Island.

“There is a casual normalization of cloakroom, fake returns and returns abuse, and that is costing retailers – and legitimate customers – dearly.”

Fight back

Ravelin says it helps merchants fight back. It can detect suspicious activity in real time, helping retailers stop bad actors and provide legitimate customers with a better shopping experience.

According to Ravelin, more than a third of finance leaders describe first-party fraud, including “friendly fraud,” returns and promotion abuse, as the top risk factor for their business.

Ravelin is working with two of its clients to raise awareness and discuss solutions to the growing problem of dishonest customers.

“Most online shoppers are completely honest, but there is a growing minority who have no problem with brands being ripped off week in, week out,” said Martin Sweeney, CEO of Ravelin.

“There are also a growing number of shady organizations offering ‘returns as a service’ to shoppers. These are rules of the game designed to protect consumers and cost retailers millions.

To deal with this, forward-thinking companies are using a combination of specially trained fraud teams, artificial intelligence and powerful automation. This is an approach that is truly making a difference, and we are proud to be part of it.”

Trainline: tackling consumer and sophisticated fraudsters

Trainline, Europe’s largest train and coach ticketing service, has a 30-strong fraud and payments team, many of whom have been trained by police and cybercrime experts.

The team has over 15 years of experience in this sector and since partnering with Ravelin, the company has seen a 40% decrease in fraudulent activity.

“To tackle the more sophisticated fraudsters, we are becoming stricter about what is and isn’t acceptable,” explains Nick Aiken, Trainline’s director of fraud and payments.

“Our approach is to approach people directly, tell them that what they are doing is wrong and that they are on our radar. We find that this type of direct engagement works for most people.

Customers who are consistently dishonest will continue to be monitored, caught and challenged. Our goal is not to scare people away; it is to encourage them to change their behavior.

Some offenders, as you can see in the examples we’ve highlighted, are incredibly shameless and openly brag online about what they do.

They will brag about walking through a barrier, about their ticket not being scanned, and they will get their money back immediately.”

Trainline is an active member of the Rail Industry Fraud Forum and helps the industry combat fraud, both consumer fraud and organised fraud.

River Island: Stop the digital shoplifters

The recent focus on shoplifting in physical stores obscures the fact that its online counterpart poses an equal challenge.

River Island, the fashion chain, regularly faces challenges from criminal gangs using social media to offer “fraudulent returns as a service” and from people who think they can abuse the system.

“Significant change can only happen if merchants, banks, payment providers, government and law enforcement work together. We can change the narrative and change behavior by raising awareness and educating people that this is criminal behavior,” Shipway said.

“Technologies like Ravelin help curb customer fraud. It gives us a clear picture of every transaction and the customer behind it, so we can identify and stop fraudsters, while protecting our thousands of real customers.”

The rise in consumer fraud is having a major financial impact on e-commerce across Europe, with many businesses losing millions each year.