Can instant refunds boost the retail sector?
Jul 20, 2022 · 3 minutes
The pandemic has caused more people to shop online and to do so more frequently. To keep this momentum in an era of profit warnings and charging for returns, Open Banking can help retailers drive brand sentiment and customer loyalty, and encourage repeat purchases with instant refunds.
We’ve seen the retail sector in a state of flux this year, with stores such as Zara and Boohoo announcing changes to their return policies. Retailers are also battling a cost of living crisis, which is seeing customers' budgets shrink.
Comments have been strewn across social media, pointing to a drop in brand sentiment since Zara announced they would start charging for returns. Many also complained about a drop in customer service and how the in-store returns process, which is still free, has resulted in longer queues. Most recently, fast-fashion retailer Boohoo also announced that they’ll start charging for returns, and many customers on social media are weighing up the price of goods versus the cost of returning them and threatening to shop elsewhere.
Charging for returns might seem like a great way for retailers to claw back money. The entire cost of returning comes in at a whopping £7 billion a year and almost half of clothing bought online is returned. Perhaps there’s another way?
In a previous blog post, we looked at the Rumble in the Retail Jungle and how more retailers are starting to charge for returns. While this may have a positive effect on the ‘serial return’ culture and sustainability, and perhaps drive more people to in-store shopping, a huge problem is on the horizon. Dave Wiltshire, Founder of Ecommerce integration platform Patchworks, said he’s “not convinced that this will drive sales” and that “a focus on the overall experience will now be even higher.”
When it comes to shopping online, our research shows that the modern-day customer is tech savvy, expects smooth checkout experiences, and wants instant refunds. They’ll move to another brand if these are not met and as a result customers can be lost forever. This is where the benefits of Open Banking can deliver solutions on a silver platter. Whether it’s faster checkout payment flows or stronger security, Open Banking can provide business-wide benefits.
Using Open Banking to increase brand sentiment, customer loyalty and repeat purchases
Charging for returns has triggered a drop in customer sentiment. It has also exposed other pain points in the overall customer experience now that another bottleneck has appeared. Traditional refunds can take between two and seven days, but with account-to-account (A2A) payments this can now take seconds, and customers no longer have to worry about when their money will arrive.
Refunds are a core part of the customer experience, so we’ve built a refunds API into our merchant portal that enables full or partial refunds to be issued from settlement accounts. It’s a hassle-free way for retailers to manage refunds and for customers to receive their money instantly. Competition is high and sales are falling. Retailers can set themselves apart from their competition with a hassle-free refund process.
With our instant refunds, the refund process for our merchants and partners is completed within one to two minutes of being requested and funds land within seconds. This means that consumers receive their funds back in seconds rather than days. Customers now have their money back and are more likely to shop again. A huge point of friction for customers is chasing refunds, which often leaves them frustrated, but retailers can set themselves apart from their competition with a hassle-free refund process.
Another potential solution is bringing back free delivery. Once used to lure customers from in-store to online, deliveries now commonly incur a charge. A2A payments remove high-cost card transaction fees so retailers can offset the cost of returns without charging customers. This can result in higher brand sentiment and customer loyalty.
An interesting journey awaits retailers, but with new technology, alternative payment methods can provide the benefits they need right now.
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