Returns Fraud

By Andrew Stolz, Senior Manager, Account Management, Accertify EMEA October 09, 2015


A retailer’s fraud team usually focuses on the actions of professional fraudsters. These are the criminal pros who attempt to steal on a large scale using automation and thousands of stolen payment cards. It makes sense to aim the artillery at big threats. However, dealing with smaller scale fraud should also be incorporated to every retailer’s fraud solution.

A different kind of fraud scenario perpetrated by amateurs is gaining traction on the fraud battlefront – especially for the fashion and apparel industry. It’s called delivery and returns fraud.

Delivery and returns fraud entails legitimate customers using valid payment cards. It’s akin to electronic shoplifting where an individual attempts one low-value fraud action, one merchant at a time. Some incidents involve fraud via a delivery channel, while others use variants of fraudulent returns. This type of fraud may seem small scale, but collectively the losses can add up quickly. According to the 2014 National Retail Federation Return Fraud Survey, the industry was estimated to lose an estimated $10.9 billion in 2014 alone.

Delivery and returns fraud tactics can take several forms. A few examples:

  • Wardrobing – legitimate purchases made with the intention of using those items and returning them for the full value.
  • Delivery denial – “I never received my goods and want a refund!”
  • Bait-and-switch – purchasing a working item and returning a damaged or defective identical item that was already owned.
  • Courier fraud – orders are intercepted and never received by the consumer.

And there are many other delivery and returns fraud tactics that can pile on losses for retailers. The key question is: What can you do to monitor and control delivery and return fraud?

Accertify believes the key to reducing delivery and returns fraud is to target who is involved in the delivery or return of the product. Retailers can leverage our platform to analyze each consumer’s behavior and identify out-of-pattern returns and other delivery anomalies. Our shared database allows each retailer to benefit from collective knowledge about returns fraud and limit its losses. 

As a result, our payment fraud solution leverages the return data to help make improved risk decisions at the time the next order is placed, helping to drastically reduce delivery and return fraud.

About the Author

Andrew, Accertify’s very first Account Manager, has over 9 years of fraud and eCommerce experience and has been with Accertify for over 5 years.