In the past year, more than £3.5 billion of UK consumer’s money has been held hostage in online refunds, according to new research.
The data, compiled by Trustly — which follows on from a year in which e-commerce growth grew five-fold — reveals that nearly half (40%) of respondents had to wait 3 to 5 working days for money from a refund to come back into their account.
According to the study, the biggest driver of these refund requests came from clothes or accessories (50%), technology (20%) and home and garden (19%).
Of all consumers surveyed, nearly half (45%) agreed that slow refunds are making financial planning harder, meaning that the likelihood of taking out a loan or paying interest on debts increases.
In fact, nearly one third (28%) said that they have been directly impacted in their ability to pay for bills, rent and mortgage payments, as a result of having money tied up in online refunds.
The data also highlights the strain that slow refunds are having on the younger generation, with 29% of 18- to 24-year-olds admitting that they have been impacted in their ability to pay for food, compared to just 5% of those 55 years or older.
Despite the opportunity to uplift customer acquisition, spend value and loyalty, most merchants do not yet offer same-day refunds. Not only is this a lost revenue opportunity, but it is costing merchants more to handle slower refunds.
This is because the process often involves collecting manual information and the long lead-time causes so many consumers to contact customer services to chase up their refund.
It became apparent from our consumer survey, that shoppers are becoming increasingly intolerant of delayed refunds – expecting to get their money back as quickly as possible – and having no issues in chasing the refund within just a few days.
While a huge number of consumers overall said they would call to find out where their money was, it was very clear that the number of shoppers willing to call as early as three days on, was significant.
This percentage also increases drastically with each additional day that passes. It is clear from these results that slow, manual refunds are a drain on merchants’ resources and cause customer friction.
Automated, instant refunds present a real opportunity to reduce customer support costs – by shortening the time it takes for a refund to clear into a customer’s account, they are far less likely to call merchant helplines. For those in the ‘market hotspots’ in particular, the cost-saving opportunity could be huge.
The refund experience has huge untapped potential – and improving this experience through instant refunds could positively impact merchant profitability by increasing sales and reducing costs.
Card payments often rely on slow processes and involve a chain of different players who need to move the money between customer and merchants – and back again in the event of a refund.
This means that customers can be waiting up to 16 days for their refund to show on their card. Online banking payments let shoppers choose a fast, convenient payment option, as well as offering a range of benefits to merchants.
But they also have the potential to support seamless customer returns. However, only a ‘full-service’ provider that can initiate a returned payment via an API, can power instant refunds and create an excellent customer refund experience.
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