How to Combat Fraudulent Losses

How to Combat Fraudulent Losses

Retail and ecommerce is experiencing a massive digital transformation, and with this comes an increase in bad actors who embrace innovation and take advantage of the latest digital fraud practices as well.

While consumers have become more comfortable shopping online, they’ve also become more comfortable playing the system.

As retailers widely use many automated solutions to deter fraud at the checkout stage, fraudulent customers are becoming wiser and even turning to artificial intelligence to keep operations moving forward. About 25% of U.S. consumers report that they have requested a refund from a retailer specifically with the intent to keep the product and their money.

More than 16% of 2021 U.S. sales were returned, with 10.6% confirmed fraudulent, reports the National Retail Federation.

Furthermore, retailers experience about $207 in tangible losses for every $100 in fraudulent orders, finds a Signifyd analysis. It’s true: The losses far exceed the order itself. This is because with all the costs—fulfillment, operational, marketing, acquiring a customer, processing to execute a sale, and chargeback fees—it goes far beyond the value of just the goods shipped.

To truly prevent fraudulent returns, the best thing retailers can do is to implement an end-to-end returns management system (RMS) with automation that will streamline, secure, and coordinate every aspect of the returns journey, as well as after-sales care management. This gives 360-degree visibility into the supply chain in order to capture the correct data for smarter decisions, automating workflows, reducing losses, and increasing efficiencies.

Automated solutions also help risk teams monitor and act on fraud activity earlier, saving money and preventing future targeted attacks. A RMS is the only way to see the whole returns journey and optimize performance in real time to stay competitive.

Other Ways to Minimize Fraud

The “customer first” mantra is important, but ecommerce businesses must consider their own viability when it comes to refund fraud. Here are a few strategies sellers can implement that will help minimize fraud risk:

  • Issue credit instead of cash refunds. There is less incentive this way.
  • Tighten return policies. Modify it to have holiday return cutoff dates or restrict popular orders to require a shorter period for returns.
  • Get proof of delivery and/or require receipts. Use a delivery carrier that will provide a tracking number or photo of the delivered product. Also, require invoice receipts that came with the product and refuse returns that do not have them.
  • Give yourself a cushion when able. This might be a restocking fee attached to high-priced, seasonal, or expensive fashion items.

Add an RMA

While these are helpful strategies, to more deeply ensure the validity of a return, a return materials authorization (RMA) can be used in tandem with a RMS, both of which take advantage of automation.

An RMA ensures enough details have been gathered to validate a purchase and then understand the reason for the return. Then, the RMS can verify the purchase and make warranty decisions based on a company’s established return rules, all through automation. A configurable and flexible RMS supports RMA procedures and the entire end-to-end returns management process.

In the end, an RMS gives retailers better control over how returns are processed, verified, and tracked, while integrating seamlessly with other supply chain systems. It means retailers get a single source of insight into returns management, reason, and outcome from beginning to finish of the entire returns lifecycle.