Woman shoplifting a pair of jeans.

How Much Are Receiptless Returns Costing You?

Posted on May 22, 2018 · 3 min read

Rising customer expectations are forcing retailers in today’s competitive market to adopt a flexible return policy. But at what cost?

Many brands accept receiptless returns as a convenience to customers, and some consider the amount of fraudulent exchanges that result to be negligible. But recent research reveals that receiptless return fraud is costing the retail industry $9.7 billion a year. For some companies, that can add up to an astounding $1 million a day. That’s a lot of revenue to ignore.

The good news? It’s a segment of returns fraud that is relatively easy to address – if you’re willing to.

Image of nesting dolls depicting portion of receiptless returns that are fraudulent.

But let’s get something straight: even with a shortage of solutions and resources, a flexible return policy need not come with fraud. And brands can no longer afford to be complacent about receiptless return fraud – the stakes are too high.  

Yes, you should offer a flexible receiptless return policy. And you should protect the integrity of your policy.

How Current Receiptless Return Policies Fail

Eliminating fraud and satisfying customers shouldn’t be mutually exclusive. But we can’t fix an entrenched problem with the same old techniques; they’re simply not working.

To prevent fraudulent returns, most retailers require a customer’s driver license or other state-issued ID. That data is stored and typically used to enforce a limit on the number of returns allowed in a specific time period, but the data is not verified. And unverified data is an open invitation for fraudulent activity.


Receiptless Return Fraud is Easier than You Think

Steps taken in a fraudulent receiptless return.

How Digital Verification Prevents Receiptless Return Fraud

When a return is legitimate, the Digital Verification system allows it.

Let’s say customer A enters a consumer electronics store and presents his driver’s license to return a digital camera without a receipt. Using authoritative data sources, the store’s Digital Verification system automatically and instantly confirms the validity of his driver’s license. No return history is required to determine if that individual is “likely” to commit fraud.

By applying their specific return “rules” to the ID (e.g. no more than three returns without a receipt in one year), the retailer also ensures that the customer is in compliance with the policy at the time of the return. The return is processed. The customer is happy. And the brand delivers on their customer service promise.

But when the return is fraudulent, the system stops it.

Let’s say customer B attempts the same return, but she’s using a fake driver’s license. When the employee enters the information from the ID, the system identifies the ID as false and then declines to complete the return. Based on the reliable results from the Digital Verification system, the retailer stops fraud before it happens and makes it unlikely that customer will attempt it again.

Digital Verification systems arm retailers with a powerful tool that helps them fight fraud and hold customers accountable for who they are without sacrificing an exceptional customer experience.

Choosing an Effective Digital Verification System

Ready to get serious about stopping receiptless return fraud? As you evaluate technology solutions, make sure they:

  • Provide instant verification of valid ID (e.g. driver’s license or other state-issued ID.)
  • Require minimal training for employees.
  • Leverage multiple authoritative data sources to accurately verify customers.
  • Complement existing return optimization solutions, ecommerce platforms, POS systems, loyalty management systems and promotions tracking solutions.
Tony Coray by Tony Coray