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Best Buy Using Shared Return and Exchange Data to Prevent Friendly Fraud

In efforts to combat merchandise return fraud retailer Best Buy has instituted a system where they scan an identity document when someone makes a return in-store. If the person has suspicious return and exchange habits they may be blocked from making future returns for 90 days.

Friendly fraud, or first party fraud, costs merchants billions each year. One of the methods for committing friendly fraud is merchandise return fraud which can include counterfeiting receipts, returning stolen items, price switching to receive a refund greater than the original purchase amount or simply buying a good with the intention of returning it as means of achieving a free rental. The Retail Equation, a company that provides return authorization services to merchants, claims that return fraud costs anywhere from $14.3 to $18.4 billion each year. Friendly fraud and merchandise return fraud is a costly problem in both the Customer Present and Customer Not Present channels.

In efforts to limit this problem Best Buy has utilized The Retail Equation’s return authorization services. When a consumer makes a return they are asked for their driver’s license or passport which is copied and kept on record. The return authorization vendor then checks this customer’s return and exchange behavior across all merchants in their network. According to The Retail Equation only 1 percent of customers making returns are flagged as committing potentially fraudulent behavior. If Best Buy receives a return that is flagged by the system they may accept the return, but put the customer on a negative list blocking future returns or exchanges for 90 days.

The average consumer may be offended by such practices, especially if they are inaccurately flagged as being a friendly-fraudster. But those of us in the risk and fraud prevention industry know how serious of a problem return fraud and friendly are, which has created the market need to for such return authorization services.


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