Real-Time Reimbursements Boost Online Shopping Satisfaction

As consumers grow accustomed to digital shopping and mobile ordering, slow transactions can make or break the customer experience. That’s why real-time payments and fund disbursements have become so important across industries.

The global value of real-time compensation is projected to reach $34.3 billion over the next five years, according to the latest Disbursements Tracker.

Additionally, nearly half (44 percent) of U.S. bills are still paid with cash or check despite the rise digital tools to facilitate payments. On the other hand, almost all (95 percent) of U.S. consumers can now access same-day ACH, so the technology is there.

While digital fund disbursements clearly can affect insurance claims, government tax returns and gig economy workers’ paychecks, it’s reimbursements that play a major role for the retail industry. The rise in online shopping means more shoppers needing refunds on returned merchandise. Thanks to Amazon’s automated returns process, customer expectations around speed and convenience have also been growing.

In fact, Amazon might be contributing to the returns problem not just by making transactions seamless but also encouraging the practice with services like Amazon Wardrobe, where shoppers can order multiples of an item and just keep and pay for the ones they want.

Studies have shown that digital commerce has higher return rates than with offline purchases. Twenty-five to 30 percent of online orders are returned, three times higher than physical purchases.

Startups and new business models have emerged to fill this niche, though.

Many Happy Returns

Kohl’s recently announced that soon all of its locations will accept Amazon returns. What might seem like an incongruous partnership on the surface makes some sense. Kohh’s recognizes this change in consumer behavior and is willing to risk aligning with the competition to build goodwill with customers and increase in-store foot traffic in the process.

Happy Returns, a company that facilitates physical returns from online shoppers through the placement of Return Bars inside of malls, other stores and college campuses, recently received PayPal’s venture capital arm, indicating that real-time payments and retail returns are reliant on each other.

Returnly, a post-purchase payments company, takes a slightly different tack and works with retailers to reduce friction in the returns process. Shoppers can make new purchases using the return credit before having to physically return goods and the platform automates returns on the retailer side and reduces risk of fraud through the use of machine learning.

Returns also present a unique seasonal challenges during the holidays and beyond. It’s no small matter. According to CBRE, in 2018 online returns were forecast to reach $37 billion in value during the gift-giving season.

Processing and reselling, reverse logistics, in other words, can be costly. This barrage of returned merchandise fuels the secondary liquidation market.

According to liquidation marketplace B-Stock Solutions, a digital platform that liquidates returned merchandise for retailers like Amazon, Macy’s, Target, Costco, Walmart, Home Depot and Best Buy, roughly one-third of consumers will return an item after the holidays. By its estimates, those returns add up to more than $90 billion.

Many retailers try to prevent returns before they happen through the use of customer reviews, robust product photography and videos and Q&As, but some returns are inevitable and retailers need to have plans in place now that free returns are table stakes in eCommerce.

“If they don’t [offer free returns], the customer is one click away from a retailer that is providing that risk-free return experience,” said B-Stock Founder and CEO Howard Rosenberg in an interview with PYMNTS. “The cost of doing business is making returns simple.”

Returns aren’t just about losing a sale and recouping costs, the returns process can cloud or elevate the consumer experience which in turn has financial implications for retailers.

The Journal of Marketing Research conducted a study on the potential impact of online product returns and found that returns policies directly correlated to increased purchasing. Over a six-month window, retailers that offered low-risk returns saw 45 percent higher profits per customer, and over a three-year span this translated to 29 percent higher profits per customer.

Despite consumer demand for low-risk returns and real-time payments, many customers and businesses are still reliant on complicated and slow methods of payment, which can lead to costly delays.