What is Return Fraud? How to Secure your Store from Ecommerce Return Fraud?

May 22, 2021 Written By M-Connect Media

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Sometimes, online customers love a good product returns policy than products. They feel more satisfied when purchasing a product knowing they can return it. This is why you need to create a solid policy that makes sure a sense of security and flexibility. As a result, your customers will see you as one of the most respected brands with quality and commitment.

Well, this is okay and you should create a customer-friendly policy but you have to be careful of return frauds, some fraudsters can hock customer accounts to initiate returns and transactions. eCommerce sellers who want to stay away from this kind of fraud should educate themselves and about the ways to prevent it.

Return fraud occurs when customers steal from retailers by returning items that do not qualify for a return or refund. This can be the result of an honest customer mistake on the part of the consumer, but an enhancing number of cases involves premeditation and malicious intent.

What is Return Fraud? Return Fraud impact on Retail Industry

Return fraud refers to the act of returning customer products to a retailer for a refund, in violation of the merchant’s stated return policy. The merchandise may be ineligible for a refund because it was purchased from another retailer, or because the item is used, or was marked as otherwise ineligible for a refund before purchase.

When it comes to fraud in the retail industry, generally, a return occurs when a store owner needs to refund money to a customer following their return policy. The merchant initiates the return process and passes it through to the payment processing department then to the bank, and finally, the bank credits the customer account.

The fraud is attempted by a fraudster to receive the funds at the end of the process. These online fraudsters gain access to the eCommerce website and merchants accounts, send the refund request, then transfer those funds to their account. They use customer accounts so that they cannot be identified when the fraud is discovered. It’s also possible for fraudsters to hack a payment terminal and use the credentials saved on it to access the accounts of the previous owners.

What Are the Types of Return Fraud and Ways to Prevent It?

Refund frauds exit on a wide spectrum, ranging from honest shopper mistakes to malicious activities on a large scale by organized crime rings. Let’s look at types of frauds that can be attempted by fraudsters.

  • Merchandise Return Fraud

It’s good knowing that the eCommerce market is growing but there’s a chance of risk of return frauds. That means a greater chance of fraudulently returned merchandise and goods. Retailers need to learn to protect themselves against this type of return fraud by educating themselves.

The fraud involves a person attempting to claim a refund on purchased items by just showing a receipt, and not including the merchandise. Well, these are the most common problem that happening nowadays as people fraud are increasing by the time. To help avoid such scenarios, make sure that your return policy is clearly mentioned on the website and also consider including this information on the return receipts. Hence, make sure that you need to take care of all aspects to secure yourself from such cyber threats.

Additionally, you have to look for ways for dealing with online returns. Make sure that your return policies are clear and deemed to be legitimate to make any return. It’s better to have a policy to encourage product exchanges rather than refunds.

  • Free Renting

One of the most attempted fraud is free renting or wardrobing fraud. Well, in this case, shoppers buy items to use once and return them later. Often seen as a victimless crime.

You might be thinking why it’s called wardrobing fraud? So, the term is becoming one of the new trends in online return fraud. Today, it’s not just limited to expensive clothing. But it’s a kind of return fraud where an item like electronics and even a computer is purchased, used, and then returned to the store for a refund.

What you can do in this case is that you should include a product tag on the clothing items that cannot be replaced. If it is removed, this will be evidence of tampering. Also, those clothes cannot be returned unless the tag is still in place. Along with this, retailers can attach a return policy to the tags to prevent fraudulent return activity.

  • Digital Gift Card Fraud

Digital gift card frauds are also the most occurred in the eCommerce or retail industry and so convenient to target for fraudsters. These gift cards are like digital cash that’s not subject to any credit or debit card regulations. This is why it attracts more fraud attempts to use these cards during peak sales seasons.

It’s also easy to use these cards for online purchases and or get back into cash. The giftcardholders can shop online to get a discount. The fraud is especially attempted during the holiday season as there were huge traffic and lots of customers are likely to buy products. Fraudsters know it’s easier to use these cards during peak sales seasons.

To secure your store from this kind of fraud, we recommend you to have your own fraud prevention department, but this is a much more expensive option. Retailers who offer gift cards can strengthen their internal controls to track each one of their gift cards from purchase to redemption.

What you can do is take the help of professional eCommerce experts or Developers to make sure you are safe from this digital gift card fraud. To secure your store, you can also follow the best security practices to avoid data breaches on the types of gift cards you process.


Well, the issue of return fraud will continue to grow in the future, so retailers must follow the best security practices to protect themselves and their customers by using a set of prevention solutions. There’s no perfect solution to secure your store from getting attacked by fraudsters as all you can do is keep an eye on new technology and security measures.

Need help in preventing your eCommerce business from return fraud? M-connect Media can assist you in securing your store with the help of eCommerce experts. We are a renowned eCommerce giant for the last few years with in-house eCommerce development, designing, and consulting services. Give us a call to know more about us.

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