Policy abuse is a growing problem in e-commerce

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Download Beyond Ecommerce Fraud: How Retailers Can Prevent Customer Policy Abuse

Retailers are well aware that as technology makes it faster and easier for consumers to shop online, bad actors are not left behind when it comes to adopting their methods in the face of new retail opportunities.

However, many retailers are frustrated with their inability to identify and block policy abuse by known customers on a large scale, according to a new report from PYMNTS. In Beyond Ecommerce Fraud: How Retailers Can Prevent Customer Policy Abuse, a PYMNTS and Forter Together, PYMNTS found that consumer abuse of policies costs US retailers more than $ 89 billion annually. Ranging from false claims for item not received (INR) to returns of items for a full refund after the customer has used the item but claims it has been damaged, abuse of customer policy is costly, persistent and difficult to follow.

Share of annual income lost due to policy abuse each year

One of the most common types of customer policy abuse is also the easiest to commit, PYMNTS found. Promotion abuse is perhaps the easiest type of fraud for consumers to perform, as misused discount codes, free trials, or scanned physical coupons can create “extreme” discounts that are used and reused. well beyond their original intention.

The challenge for retailers is how to coordinate surveillance of large-scale policy abuse and how (and to whom) to assign the daunting task. Since many ecommerce companies handle returns and complaints exclusively through customer service portals, identifying, tracking and blocking offenders, especially sophisticated serial abusers, is difficult without a comprehensive, technology-driven system that eliminates vulnerabilities.

Percentage of retailers who experienced promotion abuse

PYMNTS found that the e-commerce boom of 2020 brought most businesses with a digital storefront (87%) a wave of new retail customers, and many were ill-prepared for the security risks associated with a growing business. booming line. Retailers have struggled to make online shopping easier for consumers, and this drive to remove shopping friction has amplified the risks. As retailers provided customer experience features like instant credits for online INR claims and other liberal return policies, they faced a new wave of attacks from bad actors.

As brands create these policies in the hopes of building consumer trust and loyalty, these efforts come at a price for some retailers as some consumers take advantage and initiate fraudulent claims.

The losses suffered are significant.

Many brands have taken the approach of developing their own methods of tracking thesePart of e-commerce retailers who experienced abuse of unreceived items that saw an increase in fraud last yearFraud types, but few succeed in tracking repeat offenders and simultaneously blocking further fraud attempts. Many retailers continue to manually track these fraud attacks.

PYMNTS research found that 89% of online retailers have experienced at least one type of policy abuse in the past year, and businesses can lose up to 2.2% of their annual revenue due to of these types of fraudulent claims. Larger retailers were frequently the target of policy abuse. Retailers with over $ 1 billion in annual revenue lost 2.4% of their annual revenue due to these false claims.

To learn more about how retailers are tackling fraud and the options available to track and block known customer abuse at scale, To download The report.


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