Apple’s return policy is a good example. Returns are allowed within two weeks of purchase. But the items must have been purchased directly from Apple, not a third party, and be in acceptable condition — software unopened, all cords and adapters included, etc. This helps Apple defend against cross-retail returns and other types of return fraud without discouraging genuine customers from buying.
2. Use AI and Machine Learning for Fraud Detection
Return fraud can be tough to detect and stop in the moment, especially during the holiday rush. But by detecting and even predicting potentially fraudulent behaviors, artificial intelligence can help defend against fraud in real time.
AI and machine learning tools can help monitor and analyze customer behavior, both in-store and online. In tandem with compatible Internet of Things devices for video surveillance, these tools can help catch in-store swaps and prevent price switching at the return counter. Similarly, AI can be leveraged both online and in-store to flag suspicious customer patterns such as excessive returns, creating multiple accounts or returning high-value items without receipts.
AI-powered data analytics can help retailers identify and stop bad actors right away. According to PYMNTS, a news provider for the payments industry, AI can even be used to help automate returns for trustworthy customers while simultaneously enforcing a more detailed process for untrustworthy ones.
“The key is to teach your AI models and the systems to ‘think’ the ways these people think and ask the right questions at the right time,” Doriel Abrahams, head of U.S. risk at Forter, tells PYMNTS. “There are people out there whose entire purpose in life is to find loopholes and little cracks” in business practices and “make them into full-blown holes.”
RELATED: Detect e-commerce fraud and protect your organization.
3. Require Digital Receipts and Verification
Retailers commonly require receipts as proof of purchase when making returns. But if a company doesn’t specifically require a digital receipt, bad actors may have an easier time getting away with fraud because paper receipts are easier to manipulate.
As Bank of America notes in a company blog, “Fraudsters may forge receipts, pick up discarded receipts or use previous receipts to enable their fraud. They will then enter a store and pick up one of the items on the receipt before heading straight to the counter to request a refund for the item that has not been sold.”
This isn’t to say digital receipts can’t be manipulated, but, according to the NRF, it is less common. The data reveals that, over a year, over 25 percent of retailers experienced return fraud that involved counterfeit paper receipts, while just 16 percent experienced fraud that involved e-receipts.
UP NEXT: The next phase of retail is unified commerce.
A big reason for this is that digital receipts can’t be forged or adjusted. Plus, digital receipts are tied to a customer’s unique transaction history, making it easier for retailers to verify legitimate purchases. This is why they are as important for retailers as they are convenient for customers.
“Customers like digital receipts because, unlike thermal paper receipts, they won’t fade and are convenient to keep,” writes Sean Peek, a senior analyst and expert on business ownership at Business.com. “Retailers like that digital receipts speed up the checkout process and that customers can’t counterfeit or alter them, which reduces the cost of fraudulent returns. These are handy win-wins.”
