Retail by its nature is increasingly at the forefront of changes in the macroeconomic environment and technology shocks. This past year was no exception with the news dominated by economic turbulence, rising returns costs and of course, both the threat and benefits of AI. With 2024 just around the corner; what can we expect for e-commerce merchants heading into the new year?

Return and refund policies get personal

Balancing profitability and customer experience across return and refund policies is getting notoriously tricky. Brands like H&M and Zara made headlines this year by reintroducing returns fees for customers to minimise the cost and environmental impact of return management. However, in 2024, we’re expecting merchants to seek a new, more dynamic solution to managing abuse of their policies that doesn’t simply push the cost back on all of their customers.

Personalisation in marketing campaigns has grown steadily in recent years as technology has matured. Now merchants are applying personalisation to their refund and returns policies to create more tailored shopping experiences and reduce customer insult rates.

Merchants have already started to offer free returns for customers that are part of loyalty programmes, but what we foresee is merchants using machine learning on larger datasets (orders, accounts, etc) to quickly differentiate between good customers and those more likely to take advantage of their refund and return policies.

Once clearly identified, good customers are granted the trust they deserve with convenient refunds and returns. Conversely, once a policy abuser has been clearly identified, their shopping experience is amended with selective friction such as requiring in-store returns or refunding with store credit. For the fraudsters, their claims are denied outright, and their identities are blocked even if they create a new fake account.

AI-driven abuse needs an AI-driven counter measure

The AI explosion is set to continue in 2024. The wider availability and increasing sophistication of AI tools have transformed the online threat landscape. Now, ecommerce is hit with more pervasive, sophisticated, and scalable attacks, with abuses to merchant policies becoming especially challenging to detect.

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By GlobalData

In 2024, e-commerce merchants need to ramp up safeguarding efforts to protect themselves from policy exploitation and threats, especially the rise in consumer misuse of refunds, returns, and coupon code scams. In this arms race, the only means to defend against AI-driven attacks is AI-powered protection. More businesses will leverage machine learning to resolve the true identity of their consumers across many fake accounts. If neglected, merchants risk falling prey to more sophisticated fraud and abuse attacks.

The rise of “Fraud as a Service” and ATO attacks

Social engineering attacks are on the rise, and ecommerce merchants are increasingly vulnerable to sophisticated policy abuse and ATO (account takeover) attacks, forcing them to look for more sophisticated ways to track and better differentiate between their good customers and hijacked accounts.

Not only is it a dread-inducing thought for many of us, having our account taken over and a malicious fraudster spending freely, but it is equally as dread-inducing for merchants too. This is especially true in the age of AI and the dark web, which have given classic ATO attacks a new lease of life.

Fraudsters-for-hire and credentials for sale on the Clear Web or the Dark Web are making these types of attacks far more accessible, even for the novice criminal. It is easy for anyone to find “how to” guides for how to scam merchant’s refund policies, to buy account logins that range in price based on the stored credit card details or loyalty points in the account. In addition, more widely available AI tools have given bad actors the ability to automate and work at far greater speed, scale, and sophistication than ever before.

The availability of this information on the dark web, and more and more commonly, on the clear web, for anyone to access, has been a growing challenge for merchants. But combine your average serial abuser with AI-powered fraud tools, this threat is amplified, and merchants will need to evolve to this new technology-powered threat landscape.