December’s dawn brings with it a flurry of retail spending. Gift giving is top of mind, to be sure, but consumers are also treating themselves along the way as promotions and discounts are the hallmark of events like Cyber Monday.
And in the wake of all that spending comes a surge, too, in returns and refunds. If last year’s activity is any indication of how much comes “back,” consider the fact that the National Retail Federation has estimated that in all of last year $743 billion of merchandise was returned, and $148 billion was tied to holiday sales-related returns.
Beyond store credit, returns also generate refunds — and, as PYMNTS Intelligence has found, speed leads to satisfaction when it comes to consumers getting their money back, and they’re willing to pay for that option. Data from PYMNTS research earlier this year, in collaboration with Ingo Payments, show consumers are 39% more willing to pay a fee to receive a refund disbursement than the average disbursement.
Returns are part of any retailer’s relationship with customers — and buyer’s remorse can translate into a sticky customer relationship if returns and refunds are handled adroitly. Separate PYMNTS data detail that merchants that expect an increase in revenue are 31% likelier to offer online returns than those that expect no revenue change, per the findings of the “2024 Global Digital Shopping Index: SMB Edition,” commissioned by Visa Acceptance Solutions.
The movement is global in scope.
Last week, Worldpay introduced what it called a “first-of-its-kind service” capable of delivering near-instant refunds. The company said its own research has shown that 40% of customers expect a refund within 24 hours of making a return, and the new capability — available to most U.K. shoppers using Mastercard and Visa cards when buying from participating retailers — get those refunds in minutes for online transactions.
And Indian FinTech Razorpay enables end users to request instant refunds that are typically available within minutes.
In an interview with Karen Webster, Jeremy Balkin, founder and CEO at TodayPay, said refunds “are a massively inflexible, broken part of the payments ecosystem. And I want to see if we can fix this.” TodayPay offers “Refunds as a Service,” which enables merchants to offer customers instant refunds across multiple payment methods, and though a TodayPay wallet, if they so choose.
Through the new service, the refunds are decoupled from the logistics of the returns themselves and severs the refund from having to be done over the card rail, said Balkin.
Along with speedier payouts comes the specter of fraud. River Island Senior Operational Risk Manager Grant Shipway told PYMNTS, “Organized refund fraud as a service is becoming more common. Criminal enterprises are increasingly advertising and promoting these services on social platforms like Telegram, Discord, Facebook, TikTok and Instagram, tempting more and more consumers to act dishonestly. Cybercriminals are also informing consumers, via social media, about tricks and strategies they can use to become more adept at committing — and getting away with — fraudulent returns.”
Against a backdrop where the National Retail Federation has also estimated that retailers have grappled with $101 billion in returns-fraud-related losses, as noted here, artificial intelligence (AI)-driven chatbots deployed for online purchases can help flag customers exhibiting suspicious behavior. Forter, as relayed to PYMNTS in an interview, leverages its platform to ascertain identities across its partner firms, employing advanced analytics and generative AI intelligence to map out these identities and link them to specific behaviors.
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