As more consumers abuse transaction policies, e-commerce retailers are seeing their profit margins for summer sales decline. friendly fraud.
The shift towards dishonesty in buying behavior is significant. According to a Consumer Pulse Survey conducted by Fraud and Risk Intelligence firm Riskified They reported increased fraud, abuse of discount codes and promotion codes, and other policy violations. The higher volume this summer surpassed the previous year, including during the December holiday period.
Riskified surveyed over 2,000 Americans and Brits who had committed or were considering policy abuse. Researchers found that summer was a time when 24% more Americans were likely to commit unethical shopping due to the increased costs and financial pressures.
A similar survey conducted in the U.K. showed that nearly one fifth (18%) of shoppers were more inclined to commit policy violations during the summer. Under half of respondents (49%) said that they were more likely to engage in other fraudulent shopping practices due to increased financial pressures.
Understanding and Combating policy Abuse
Riskified says that merchants looking to gain loyal customers are turning to lenient returns policies and product promotion. These same strategies, however, have made them vulnerable to policy abuse. The data revealed that policy abuse cost merchants much more than higher chargeback losses last year.
Policy abuse — including refunds and returns, reseller purchases, promotion, and coupon fraud — tends to surge in the summer. According to Joe Gelman, a policy abuse expert at Riskified, the cause of this increase has been a mystery.
Merchants can use the data collected throughout the entire customer journey to create a comprehensive picture of the good and bad customers. This includes order management systems and return merchandise authorization systems. Also, customer service ticketing system, CRM platforms, and customer service ticketing are sources.
Gelman, speaking to the E-Commerce Times, said that this allows them to create a detailed image of each customer and adjust the level of friction in order for the desired customers to have a positive experience, deter friendly fraud and block the worst offenders.
Finding Why and Balancing Options
The primary goal of this survey was to better understand why people are drawn to what is known in marketing circles as friendly fraud. According to previous industry studies, 52% of U.S. consumers spend more during the summer months than they do in cooler seasons.
Summer is the peak season for fraudulent buying. The rates nearly doubled from winter.
The desire to save money is one of the main reasons people violate their policy in the summer. They buy more things to satisfy activities and want to pay less. Summer costs, such as travel, special events and vacations, are motivating factors for some.
The shifts in consumer attitudes are primarily seasonal and dependent on the industry. Gelman suggests this can sometimes be a little like sociology.
You can look at trends in a particular season and think about what’s going on with the culture, business environment or consumer mindset. “These shifts do occur,” he said.
The summer of this year saw a massive peak. The latest findings have provided further insight into the changes in behavior that consumers began to display last summer.
Research insights on policy abuse
Coupons and promotional offers are one of the most common forms of shopping abuse. Email makes it simple to commit.
58% of Americans admit to using multiple email accounts to reuse coupons and discounts. In the U.K., 48% confessed to the same.
Men are more likely than females to violate policy rules (65% of men as compared to only 45% of women). 56% of men and women bought products to resell for higher prices.
Deception was often a factor. To receive a return or replacement, for example, 47% claimed falsely that an online purchase was never delivered.
The most common policy violations were committed by younger consumers, both men and women. Incidents frequently involved “wardrobing” — buying clothing to wear once to return it afterward; this abuse was perpetrated by 53% of respondents aged 18-24 and 63% of respondents aged 35-44.
In every case, guilt was not enough to deter dishonest behaviour. Even though 54% admitted to feeling guilty, consumers still violated policy.
Many shoppers were caught in the middle of a dilemma: either they were committing an innocent online activity, or they were stealing money without consequence. With policy misuse — or is it really abuse? — the lines of legality became blurred.
The way people perceive crime on the street is different from how they view digital theft. Gelman says that online theft involves less friction and principle.
You don’t need to get up from your chair. He said that you feel further removed from consequences. It’s like taking something off the shelves at a store and seeing it on the shelf. Now it’s gone.
Challenges Tackling Consumer Fraud
Abuse of policy can cause merchants to suffer substantial financial losses. To keep good customers, it’s important to allow shoppers some leeway in return windows and give uncontested refunds, especially during high-competition shopping seasons. Gelman explained that in order to strike the right balance you must first understand the causes of abuse.
“The Holy Grail in this case is to find an automated system that can tell good customers apart from bad ones. It is not realistic because these businesses receive so many orders and complaints.
You can give a warning if the offender is low-risk, or if there’s still a chance that they will have lifetime value. Or you can apply some friction. Gelman said that sellers could block repeat offenders who are high-risk from completing future transactions.
Gelman stated that it was difficult in the U.S. as well as U.K. to bring charges of theft against customers.
AI Detection Offers Limited countermeasures
Riskified, like other ecommerce platforms has had some success in using AI to identify fraudsters. Gelman says that many merchants, however, are reluctant to rely on AI to automate security tasks.
There is potential in the area, and some places are exploring this when it comes to evaluation [possibly fraudulent] “It is a claim,” he said.
Riskified’s AI algorithm connects all data that supports questionable transactions. It can, for example, identify customers who have made multiple orders but returned the majority of them.
He quipped: “Policy abuse has become a trend, where people are becoming more comfortable doing it. This is alarming to merchants who created this monster themselves.” “Consumers found out that they could get away without paying.”
Gelman said that those who violated the law will be forced to decide if they want to feed their families or justify their transaction policies on the basis of a bad economy. Retailers will have to decide whether they want to enforce and toughen policies, or lose customers.
