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AI Fights $76.5B Retail Return Fraud Ring
18 Dec
Summary
- Nearly 10% of U.S. retail returns are fraudulent.
- Happy Returns deploys AI tool 'Return Vision' for fraud detection.
- Return fraud costs U.S. retailers an estimated $76.5 billion annually.
A substantial problem costing U.S. retailers $76.5 billion annually is fraudulent returns, where customers send back cheaper items instead of purchased goods. UPS-owned Happy Returns is actively testing its artificial intelligence tool, Return Vision, to combat this issue. This advanced AI system helps identify suspicious return packages by analyzing their contents and flagging them for human review, thereby preventing fraudulent refunds.
The ongoing holiday season is a critical period for return fraud, and Happy Returns' AI tool is being piloted with several key clients, including Everlane and Under Armour. The system flags returns initiated unusually quickly after delivery, linked email addresses, or previous suspicious activity. Workers at drop-off points can also reject obvious mismatches, with the AI providing an additional layer of protection against less apparent deceptions.
While return fraud is a growing concern, with studies indicating about 9% of the $849.9 billion in expected retail returns by 2025 could be fraudulent, retailers are increasingly turning to AI. The Happy Returns/NRF survey revealed that 85% of merchants are using AI or machine learning to fight fraud, though results have been mixed. Return Vision aims to specifically address instances where incorrect items are returned, adding a vital safeguard for businesses.
