Half of merchants around the world have experienced a significant increase in refund and promotion abuse in the last year, driven by Covid-19 and the shift to eCommerce, research by fraud detection and payment acceptance specialist Ravelin finds today.
51 per cent of merchants have experienced an increase in refund abuse, where consumers falsely claim not to have received an item they ordered online in order to receive a refund, made easier in some cases with distanced doorstep deliveries that are hard to confirm. While 49 per cent have experienced an increase in promotion abuse, where consumers use a promotional code to get a discount that wasn’t intended for them.
The travel and hospitality industry is the worst hit, with 53 per cent saying they’ve experienced an increase in both types of abuse. Customers are less likely to be loyal to an airline or hotel than a supermarket, so establishing a single customer view is problematic, meaning its extremely difficult to track legitimate use of discount codes or referral codes, especially while they are being used at scale to help retain customers.
These are the findings from Ravelin’s Online Merchant Perspectives, Fraud & Payments Survey 2020 report, which draws on the opinions and experiences of 1,000 fraud and payments professionals around the world, providing a valuable in-depth understanding into merchant fraud teams, their environment, top business threats, fraud activity trends and forecasts.
Contactless delivery and more flexible refund policies are being blamed for the increase in refund abuse for physical goods, as it has now become easier for consumers to take advantage of the system. The rise in promotion abuse, which a third of merchants list as one of their top three threats, is made worse by the sheer number of sign-up and referral bonuses and easy-to-guess codes used to draw in customers, which make it hard to spot misuse.
Mairtin O’Riada, co-founder and CIO at Ravelin said: “While Covid-19 has driven many consumers online, it’s also driven up fraudulent activity across the board as cybercriminals and opportunistic customers look to game the system to get a good deal. While the individual instances of refund and promotion abuse tend not to amount to a huge amount money-wise, when you’ve got thousands of these instances occurring in a short space of time, your profit margins are going to take a serious hit. It’s death by a thousand cuts. Conversely, understanding and analysing your company’s risk landscape and balancing frictionless customer service and protecting your business with robust measures to reduce these fraudulent activities can be a huge boost to profit.”
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