Dec 12, 2006

Return fraud is in the news again; banks can build lots of goodwill by addressing it

Return fraud is a growing problem which first made it into public news last Christmas. Here it is again, in a Washington Post article titled Return Fraud Earns Retailers' Wrath.

I write about this problem because:

a) it is huge, costing retailers 3 to 5 times as much as bank losses due to credit and debit card fraud,

b) a credit card is almost always used in the process of returning goods, and

c) if card issuers can help retailers solve this problem in a simple, convenient and inexpensive way (unlike the current solutions described in the article mentioned above), they will be making payment cards much more attractive and valuable to retailers, thereby justifying interchange fees in the process.

See my prior posts on how this can be done:
Returns fraud
Try this: increase profits by pampering best customers … and firing undesirable customers

You can also click on Return Fraud in the CATEGORIES section on the right of this page.


Aneace Haddad said...

I received this comment from an anonomyous reader:

Anonymous said...
"I recently completed a bit of research regarding return fraud, specifically focusing on methods to prevent it. The customer tracking may work for now, but there are already consumer groups that have aligned against it. I suspect that it'll become a free speech/identify theft issue eventually, depending on how fast the big retailers are to adopt it."

I would be very interested to hear of any research on methods to prevent return fraud, and the consumer backlash that this reader refers to.

Anonymous said...

I don't know where you get the idea that a credit card is "almost always" used in return fraud, because there are many methods of return fraud that do not involve a credit card at all. It'd be too lengthy to list the many ways return fraud can and is perpetrated without credit cards, furthermore the use of credit cards is completely unrelated to the topic of return fraud. It's just a method of payment, and I fail to see how the statement that they are "almost always" involved is justifiable.

Aneace Haddad said...

Easy. I am focusing on the 50% of return fraud that is done by people "renting" merchandise for free (actually better worded as "return abuse"). A payment method is ALWAYS used to purchase the item in the first place, and a payment method is ALWAYS used to refund the customer when they return the item. More and more, that payment method is plastic. And it can become plastic for even more transactions if using it makes it easier for the 95% of customers that return merchandise in good faith. Fix this problem, and the other half of return fraud, which you are referring to, becomes even harder as well.