What is Refund Fraud?

January 14, 2022

So we’ve told you about fraudulent chargebacks… but did we mention refund fraud?

If you thought the proverbial Boogeyman (Friendly Fraud) already sounded terrifying, wait until you hear about how these fraudsters are cheating your refund system.

Have you ever heard of the term DNA? How about (P)EB? No?

It’s okay, many merchants aren’t aware of how fraudsters are buying high priced items (or large shopping carts) and then using these types of codes to receive a refund on their entire order!

No, these terms aren’t some mysterious foreign language…

They’re simply refund codes, and they mean:

  • DNA — Did Not Arrive
  • (P)EB — (Partially) Empty Box
  • FTID — Fake Tracking ID

Do these sound a bit more familiar? Well, imagine that you sell a laptop and a tablet to Jane. Jane is at university and needs the items to complete her study. However, Jane has just found out that she has been laid off from her job as a barista at the local cafe… So what does Jane do?

Jane decides to get in touch with your customer support team and claims that her package never arrived, so she would like a refund for the products that she apparently “never received”. The merchant can now choose to approve the refund request and bear the costs (which most merchants do, given there is no way of telling that this is a disingenuous claim), or refuse the refund request and face a potentially lengthy dispute process with Jane. Hmm…

Or maybe Jane decides to contact the merchant asking for a refund, claiming that only the laptop arrived and therefore half her order was missing, and would like a refund for the item that never arrived in the package… then the same procedure follows, and it is left up to the merchant to bear the costs.

Oh but wait, there’s more. The really sinister fraudsters (we like to call them the black belts of Friendly Fraud) will use a FTID whereby they will actually manufacture a fake return label. FTID is the riskiest process, but if pulled off correctly is essentially untraceable.

The Dark Side of the Web

Unfortunately these black belts are not the type to keep their game a secret.There are hundreds, potentially even thousands of hidden online forums, groups, and academies just filled with internet scammers undergoing a degree in fraud, and their major — refunding.

No merchant is safe. Scammers will call out eCommerce stores who are easy targets, they will instruct on the best way to get around refund policies, they will even run crash courses in specific dollar amounts to hit, and when.

I bet you didn’t wake up this morning and think about the possibility of how many illegal online hit lists your eCommerce store, and livelihood, has been mentioned on…

If you’re not worried by now about what these culprits are concocting, it’s probably time to start looking at your refund policy, because there’s a high chance this may have happened to you before.

We’ve Got Your Back Covered…

Don’t fall victim to the refunding snipers who are sitting back and waiting for the perfect moment to hit your store with a high ticket refund.

The key challenge here is to get an idea of who your users are before shipping the item in the first place, something that’s only possible thanks to digital footprint analysis.

Disputify is armed and ready with billions of data points from our network to preemptively flag customers who have been known to be trouble. Empowering you with the ability to pick the potential bad guys (who are seasoned at the game of refunding), from genuine customers who are looking for a legitimate refund.

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