Just over a year ago, 93% of global merchants said offering generous returns and refund policies was vital to engaging and retaining customers. Today, the story is quite different.

Over three-quarters of merchants feel overwhelmed by the volume of potentially fraudulent or abusive claims they receive regarding exchanges, refunds, or returns. Many have reactively tightened their policies, and policy abuse — whereby consumers knowingly exploit a merchant’s terms and conditions for personal gain — is becoming more common and seen as “justifiable” shopping behavior.

Merchants can no longer afford to extend blanket generosity, but now good customers feel the impact of policy abusers. In the year ahead, let’s introduce a story with a happier ending for merchants and customers alike.

The returns & refunds saga

Return, refund, and exchange fraud and abuse are complicated. Modern challenges can feel like a “monster of a merchant’s own making.” During the ecommerce boom, offering super consumer-friendly policies became normalized. Amazon set the standard every brand felt compelled to meet to retain customers, including providing long return windows, speedy deliveries, and flash promotions. Booming sales outweighed the losses made on generous policies, but as the market normalized and consumers got savvy to abuse and fraud methods, merchants could no longer overlook the losses. 

Policy abuse exists on a blurred ethical spectrum, meaning “abusers” are a mix of some “good” customers alongside professional fraudsters, compounding the problem. AI and Dark Web “Robin Hoods” have recently added further complexity. Forums thrive on the Dark Web, offering tips and tricks for even novice fraudsters to manipulate retailer return and refund policies for substantial gain. Fraud-as-a-Service kits and AI tools like Worm GPT drive activity, spurring more sophisticated attacks and welcoming a wave of novice fraudsters to the policy abuse game.

Consumers are paying the price of policy abuse

The direct and indirect costs of forgone revenue, lost stock, and return logistics total an estimated $394 billion globally for retailers across the key ecommerce markets surveyed in 2024. However, calculating the true price of managing returns, refunds, and exchanges is nearly impossible.

Whichever way you do the math, two things remain clear: a sizable chunk of claims are fraudulent and abusive; the cost is too high to simply be written off as a “business cost,” meaning the process needs tightening and improving. 

Merchants, particularly those less adept at differentiating between good and problematic customers, have started passing costs onto customers indiscriminately. They rely on blanket rules that, unfortunately, alienate loyal and valuable shoppers.

 A Riskified report found that in 2024:

  • Return fees were introduced by a third of retailers surveyed
  • Credit or exchange-only policies became more popular
  • Grace periods shrunk, with around 40% of retailers offering just seven days to file a request, in stark contrast to the typical 30-day period bricks-and-mortar stores usually offer

There are good reasons why merchants cannot and should not offer all customers the same benefits. However, flexibility and convenience are non-negotiable. Research consistently shows that policies like streamlined refunds and no-cost returns don’t just foster satisfaction — they build trust and encourage repeat purchases. Businesses that fail to prioritize these critical factors risk alienating customers and jeopardizing long-term growth. Simply put, making customers feel undervalued is a cost no business can afford.

Outsmart risk while keeping your customers happy

In 2025, you no longer need to accept strict customer policies as the only answer to abusers. Sophisticated AI-powered technologies empower your team to strategically decide which customers receive that great, seamless experience and which do not.

Make more dynamic decisions by utilizing the vast amounts of data on your customers and by adopting an identity-based approach. You can also adopt a “sliding scale” approach to returns and refund policies, rewarding your loyal customers and restricting serial returners or potential fraudsters. New technology platforms connect different teams and their respective insights, making cross-functional collaboration and success easier to facilitate and measure.

For retailers managing both online and physical storefronts, this year, Riskified and Appriss Retail united to set a new standard in omnichannel fraud and abuse protection. Combining online abuse and fraud detection with in-store returns expertise, this partnership gives merchants an unprecedented 360° view of customer behavior to protect revenue and close policy gaps, all while keeping good customers happy.

Are you ready to limit policy abuse without impacting your good customers? Read more here.