By William McMullan, Director of eCommerce at Trustly
As more of our purchases move online, consumers are spending increasing amounts of time chasing refunds. Emails, calls and chat messages to customer service teams with questions such as “Where’s my refund?” and “Why is it taking so long?” cause stress and frustration to consumers and brands alike.
The pandemic has put refund policies in the spotlight. Consumers who invested money in tickets, holidays or flights quite rightly wanted their money back for services they were no longer able to use. And while most consumers have been patient with brands as they scale up refund processes, that patience is wearing thin.
Working with the right payment merchant is therefore critical to businesses looking to improve their customer service and customer loyalty. Understanding how the refunds process impacts customers is a vital step towards improving the service.
Releasing refunds
Traditional financial systems do not operate at the same speed as e-commerce shoppers expect. What’s more, according to Trustly data, this disparity is placing an increased financial burden on consumers. In the past year, more than £3.5 billion of UK shoppers’ money has been held hostage in online refunds, with four in 10 consumers having to wait between three and five days for their money to be released.
The research also highlights that the main source of these refunds comes from three major retail categories: clothes and accessories (50% of refund requests), technology (20%) and home and garden (19%).
But the most worrying finding suggests that nearly half of consumers who’ve requested a refund in the past year (45%) have had their finances impacted by delays. This means that they are more likely to resort to taking out loans and paying interest on debts to cover the shortfall. Plus, more than a quarter (28%), said that slow refunds had directly impacted their capacity to pay bills, rent and mortgage.
Interestingly, the detrimental impact of slow refunds reveals a generational divide. Nearly one in three (29%) consumers aged 18 to 24 admitted that having money tied up in refunds is impacting their ability to pay for essentials like food. This compares to just 5% of over 55s.
Boosting brand loyalty
When brands make consumers wait for refunds, it puts a strain on the relationship, which ultimately hurts their reputation. The legacy systems and laborious internal processes that cause refund delays are actively preventing customer loyalty. By offering faster, more flexible refunds, retailers can help consumers to gain more control over their money and their spending, while also improving customer satisfaction.
The proof is in the pudding. Our survey of 2,500 shoppers revealed that two-thirds (63%) are more likely to spend more money with the same retailer if they receive a quick refund.
Building a more straightforward, transparent and customer-centric returns and refunds policy can not only help consumers to manage their finances, it can also enhance customer acquisition and retention. A positive refund experience is good for shoppers. And it’s good for brands, too.
