Refund Fraud Prevention: Disputify Founder Explains How His Tech Platform Addresses Online Refund Abuse

The team at Mastercard (NYSE: MA) notes that for most or many of us, returns are “a necessary evil” following the holiday shopping season.

For example, that sweater that Mom gave you might be two sizes too small. But for some consumers, returns are just “another way to game the system.” Mastercard writes in a blog post that these are the scammers that “make it difficult for the rest of us and are costly for retailers”

The COVID-related lockdowns early on during the course of the pandemic led to a significant surge in digital commerce — “a boon for retailers that also offered more opportunities to exploit generous return policies.”

Mastercard further noted that customers can claim they “never received an item, or that the item arrived damaged.” With wardrobing scams, a social media maven “might order a designer handbag, use it once, snap a selfie, and then return it — or, worse, return a counterfeit item instead.”

Mastercard also pointed out that a more elaborate scam called “bricking” involves “stripping an electronic item of valuable parts, then returning the item shrink-wrapped with its interior weighted with coins, batteries or stones so the employees handling the return won’t know the difference.”

Last month, a Virginia man “pleaded guilty to operating a mail fraud scheme and defrauding Amazon.com of more than $300,000 by buying high-end products — from a rare Fender Telecaster electric guitar to a home theater system to four $4,400 toilets with electric bidets — then claiming refunds and often returning similar but far less expensive items.”

According to Jack Bloomfield, it’s like “21st-century shoplifting.” Bloomfield is an e-commerce veteran (at just 19 years of age) and the founder of Disputify, an Australian-based startup, whose platform helps retailers track, predict and prevent customer refund fraud.

As noted by Mastercard:

Fraudulent returns like these cost U.S. retailers $25.3 billion a year, according to a January 2021 report by the National Retail Federation and Appriss Retail. That doesn’t include the cost of staffing return desks or the reputational risk of reselling used items or even ‘bricked’ merchandise to unsuspecting customers. Those added costs can also raise the price of merchandise, so curbing fraudulent returns could save money for retailers and customers.”

Jason Howard, EVP at Ethoca, a Mastercard company that helps merchants prevent transaction disputes turning into chargebacks, a sometimes lengthy — and for merchants, costly — resolution process, stated:

“Any merchant operating online needs to think of their fraud prevention strategy in 360 degrees, protecting themselves before, during and after a purchase is made. In our highly digital world, how businesses handle the return process is just as important as the experience leading up to the purchase — and can have a sizeable impact on a company’s bottom line,”

Online refund abuse is abetted by the Internet, where there are entire forums and even complete e-books on refunding schemes being circulated.

Bloomfield shared that they launched Disputify almost 2 years back after raising nearly $1 million in his first round of funding.

At present, 400 merchants are reportedly signed up for its refund detection service. In December, the firm had joined Start Path, which is Mastercard’s startup engagement program and “part of its Mastercard Developers portfolio, to work with the company’s fraud detection experts on ways to scale the startup — the more merchants in its network, the better the platform can spot offenders.”

Bloomfield’s Disputify platform is able to “track, predict and prevent these dishonest customers across the internet.”

The service intelligently “scans transactions looking for costly patterns of customer behavior across its network of over 1 million orders.”

These insights are then “returned to a merchant in seconds and can be used before the order is filled, or to understand the legitimacy of a customer’s return request based on their past behavior,” the update from Mastercard explains.

Bloomfield also noted:

“This gives merchants the power to make informed, data-driven decisions and truly understand their customer before proceeding with an order or refund request.”

The service sits on top of a business’s existing fraud detection solutions and “is simple to integrate securely with popular e-commerce platforms or via API.”

In order to complement its loss prevention product, Disputify is creating “a range of experiences that merchants can offer to its trusted customers to increase conversion rates, streamline the refund timeline and dramatically improve the customer experience post-purchase,” the update revealed.


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