New research has revealed the huge cost of returns fraud. Omnichannel returns management specialist ReBound Returns analysed data from one million returned orders on behalf of retail clients between July 2025 and May 2026. It found £29 million of potentially fraudulent returns, exposing a gap in retailer’s ability to detect and prevent fraud at scale.
Return rates are now approaching 20% of all online sales, with a total market value nearing $850 billion in the US alone. As returns rates increase, instances of returns fraud and abuse are growing too, with the global Merchant Risk Council deeming ‘refund and returns policy abuse’ to be the most prevalent fraud type facing merchants today. This is despite retailers investing heavily in fraud prevention at the point of purchase, with widespread adoption of identity verification, authentication and risk-scoring tools.
A critical visibility gap has emerged for retailers. Returns are frequently refunded before physical inspection has taken place, and data sits in silos across ecommerce platforms, stores, and third-party marketplaces, leaving operational teams without a unified view of returns.
The findings are published in The Returns Fraud Playbook, a new report from ReBound examining the scale, causes, and cost of returns fraud in modern retail.
The report highlights the potential cost of return fraud at different scales. A mid-market fashion retailer with £100 million in annual sales, a 20% return rate, and a 5% fraud rate would face a projected loss of £1 million each year to fraudulent returns. For a large omnichannel retailer with the same fraud rate, the loss would rise to £3.5 million annually. At enterprise scale, with £960 million in sales and a 7% fraud rate, the projected loss reaches £20 million a year.
The problem is compounded by low consumer awareness of the issue: UK-based fraud prevention service Cifas reports that 17% of adults don’t believe fraudulently claiming a retail refund is illegal, while 35% of 16-24-year-olds admitted they’d be willing to lie to obtain one.
Wouter ten Heggeler, product manager at ReBound Returns, said: “The returns process has become a blind spot for retailers. Investment in fraud prevention is focused almost entirely on the point of purchase. Once a return is initiated, most retailers are operating without the visibility they need to catch what is actually coming back to them. The result is that many are absorbing losses they cannot identify, let alone measure or tackle the root cause.”
ReBound’s research identifies a wide range of data points that, when combined, act as signals for retailers for fraud analysis and prevention. For example, the longer a customer holds a product before initiating a return, the higher the likelihood of returns fraud or abuse. The median lead time for a normal return is 9.5 days, but for returns flagged as potentially fraudulent, this almost doubles to 18 days.
The analysis also revealed geographic patterns in the amount of identified fraud. Poland recorded the highest rate at 6.6%, followed by Denmark at 5.3%. Both were considerably higher than the overall average returns fraud rate of 3.9%.
Wouter ten Heggeler added: “Returns fraud does not need to be widespread to cause serious financial harm; the problem scales directly with sales. A fraud rate that looks manageable on paper actually represents millions in losses, and without the right systems in place, most retailers have no way of knowing how exposed they actually are.
“Current returns systems are not built for the increasing scale and sophistication of modern returns fraud. Most rely on static rules and manual review, with limited ability to predict behaviour or flag risk before a refund is issued. However, with a more effective model – combining behavioural analysis and risk scoring at the point of return initiation, physical verification at hub level, and connected data across every channel – it is possible to catch fraudulent activity before it becomes a financial loss, without adding friction for legitimate customers.”
The Returns Fraud Playbook: From detection to prevention in modern retail is available to download from https://www.reboundreturns.com/insights-resources/the-returns-fraud-playbook/
