Riskified, a leading ecommerce fraud and risk intelligence company, released research Monday showing that efforts by online retailers to crack down on a surge in return and refund abuse are unintentionally hurting legitimate customers’ experience.
The company’s 2024 analysis of more than one million refund claims found that refunds account for 1%–2% of total sales dollars, with nearly one in four dollars claimed tied to abusive activity. In response, many merchants have adopted restrictive policies such as flat return fees, shorter return windows and delays in issuing refunds pending warehouse inspections—sometimes more than 10 days.
Riskified cited a National Retail Federation survey showing that 68% of shoppers are unlikely to return to a retailer after a refund takes more than five days, and data from Narvar indicating slow refunds are a top driver of customer service inquiries.
“Fraudulent claims don’t just hurt retailer profitability, they cost good customers time and patience,” said Riskified Chief Marketing Officer Jeff Otto. He said slow refunds frustrate loyal shoppers and can drive them away. To help retailers address both abuse and customer satisfaction, Riskified introduced Dynamic Returns, a new feature in its Policy Protect solution that uses artificial intelligence to make real-time return decisions based on individual customer risk and eligibility.
Dynamic Returns aims to replace blanket rules and lengthy waiting periods with more nuanced, identity-based assessments. The technology lets merchants issue instant refunds to trusted shoppers, ship replacements before returns arrive, or adjust return options according to fraud risk. In one reported case, a retailer using Dynamic Returns instantly approved more than half of returns for loyal customers and saw more than a 20% increase in customer satisfaction scores among those who received early refunds. Over 97% of approved early refunds were returned to customers who actually sent back their items, Riskified said.
Riskified’s report, “Refunduary is here, How to prevent refund policy abuse, protect profitability, and optimize CX,” highlights trends that put pressure on merchants’ return systems:
Holiday strain: Nearly one‑third of annual claims stemmed from November and December orders, with over half carrying into January, overwhelming operations teams.
High‑value risk: Orders over $2,000 had claim rates 2.5 times higher than orders under $100, and claims on orders above $1,000 were 33% more likely to be abusive.
Most abused claim type: “Item Not Received” claims were 25% more likely to be fraudulent than “Missing Items” claims, though legitimate cases are also common due to increased ecommerce shipments.
Early claims exploited: Claims filed within seven days were over 20% more likely to be abusive than average, putting merchants in a bind between fast service and fraud risk.
Riskified said the rise in return policy abuse and the resulting restrictive countermeasures have created a customer experience dilemma for online sellers who want to both deter fraud and keep loyal shoppers satisfied.
Dynamic Returns is part of Riskified’s broader effort to help merchants manage risk in real time, combining data science and identity insights to distinguish abusive from legitimate behaviors. By tailoring return options dynamically, the company said retailers can protect revenue while maintaining trust with customers.
The findings in the report are based on Riskified’s proprietary analysis of more than 1 million refund claims across three major retailers during the 2024 calendar year. The company’s platform, used by many of the world’s biggest e-commerce brands, applies advanced models to flag suspicious claims based on statistical patterns and behavioral indicators.