The importance of having a seamless refund system

December 15, 2022

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The importance of having a seamless refund system

With the retail industry seeing billions of dollars' worth of goods being returned or refunded every year, refunds are widely considered to be a ‘necessary evil’. According to a report conducted by the US National Retail Federation, a staggering $761 billion worth of products were returned in 2021. Of those returns, eCommerce accounted for nearly a quarter of the volume.

With numbers like these, and customer expectations of retailers at an all-time high, a bad refund solution or refunds policy could make or break a business. Poorly trained staff, or a tedious and costly returns system, can negatively impact what has the chance to be a positive customer experience.  

In an age where digital solutions and eCommerce stores are an ever-larger presence, a clear and concise refunds solution is vital to business success. Not only does it help the business save money, it’s also beneficial in retaining customers.

“Customers tend to spend a bit more, especially with the comfort of knowing that they have the option of returning their goods and receiving their money timeously,” mentions Ozow’s Head of Client Success, Fidelis Chiwara.

You see, customer retention goes beyond just offering a great product. A better refunds solution could save a business up to $125 billion each year by focusing on processes and policies that help reduce the rate of returns, according to Incisiv’s State of the Industry Report on Retail Returns.

Why a good refunds system matters

Having a simple and easy-to-understand returns policy makes for an informed consumer. And an informed consumer becomes that much more confident in their purchase when they know that if they need to return or get a refund on a product, the process won’t be tedious or time-consuming.  

A recent study conducted by Invesp, a brand consulting firm, found that 67% of shoppers check the returns or refunds policy before making their purchase. This is understandable, especially when purchasing from unfamiliar stores.  

However, when it comes to eCommerce, it goes deeper than that. It was found that 62% of consumers surveyed were more likely to purchase online if they had the option to return a product in-store. While this does work for brick-and-mortar stores that utilise a digital platform, online-only retailers have to work that much harder to put refunds solutions in place that meet the needs of customers.

Unsurprisingly, customers who were offered free shipping or a return with no extra charge were even more likely to spend. Why? Because an informed customer would be more likely to complete a purchase knowing that they could return the item if they weren’t happy with it.

Ozow’s Chief Commercial Officer, Kesheni Moodely touches on a seamless process being a key component of the customer journey, saying: “Consumers want the choice of either crediting their account with the merchant, or they want the funds in their bank account as quickly as possible. A consumer who experiences this excellent level of service is more likely to make use of the merchant and payment provider regularly, as they know they will be taken care of.”

More than just a policy

Aside from having an effective policy in place, the execution of it plays a vital role as well. While many eCommerce businesses focus on the importance of getting goods to a client, not many are focused on how to get them back in the event of a return.  

Incisiv's report found that only 16% of merchants had a strategic initiative focused on reducing returns in general. Being able to retrieve the item from the customer would require the reverse of the delivery process – a challenge in its own right.

Brick-and-mortar stores are lucky in this regard, in that they have a physical drop off point for customers to return or exchange items. eCommerce stores have a harder time retrieving their stock as it requires an even more fragmented process.

While the process between merchant and customer can be tedious, it becomes even more difficult when you have to get the product back from the customer, essentially trying to reverse engineer the delivery process.  

"Going above and beyond your policy to serve your customer can go a long way,” mentions Moodley. “Consumers want to buy from merchants who value them and treat them with appreciation and empathy. This sometimes means going beyond what your retail policy says in terms of late returns and accommodating a customer – reasonably of course.”

She also mentions that “offering the client options on how to handle their returns can go a long way in building loyalty to the merchant or brand. The ease and flexibility of the Ozow’s Refunds system directly supports our merchants in this flexibility.”

Creating an effective returns system

As Sanaz Hajizadeh, former Director of Product Management at Happy Returns says, “When customers know that they can get their money back just as easily as they can spend it, they’ll shop with more confidence and spend more.”  

To capitalise on this benefit, merchants should understand where their returns experience is lacking. And businesses need the right tools for the job, whether that be automation or more localised policy execution. Merchants also need to understand their customer returns data and whether there’s enough of it. By gathering enough data, it becomes easier to understand the root cause of a particular return.

While this might be slightly more difficult for companies that offer services as opposed to goods, the same still applies. Merchants need to consider the execution time of their service, the quality of the service delivered, as well as the overall outcome of their service.  

For merchants that operate within a retail space, especially clothing and jewellery, it's easier to identify possible qualifiers for returns. Tracking data around size and fit is a simple way to identify if the way information displayed around that product is correct. At the same time, quality of build or fabric could possibly be a key reason for a high return rate on a particular product.

This is also the point where data gathering can make an incredible impact. The Incisiv report mentioned that 7 in 10 businesses surveyed don’t have a good understanding of why their products are returned. Therefore, during data collection, study the products with the highest return rates and compare them to each other. Then try and find commonalities that might also work their ways into other products or services.

As a merchant you’re able to empower customers by being flexible. For example, offering multiple return points within your network could allow customers to feel more comfortable about their purchase, knowing they have a point to return the item if need be.

By diversifying your returns and refunds policy and by being more flexible, you can increase customer satisfaction and ultimately capitilise on retaining that customer.  

Chiwara suggests that real time clearing (RTC) on refunds is a useful option that’s available to merchants. While this might come at a slight cost, it would allow customers to receive their funds immediately and potentially spend it on something else at the same store after receiving it.

Ozow’s Refunds solution

Ozow’s Refunds solution utilises a cloud-based API that eases the friction in the returns or refunds process. With our service customers can experience a refunds solution that clears faster than any other payment method, with the funds being refunded directly into their account, no bank details required.

Additionally, our system auto-populates the amount owed, eliminating human error in that regard. Merchants also have the added benefit of reduced admin costs often associated with the returns or refunds process.  

Merchants also have the added benefit of being able to audit and track any refunds made. Our intuitive system also allows for an effective top-up mechanism, which allows merchants to refill their cashflow as needed.

A reliable refunds solution gives customers a foundation of trust in a business. This trust doesn’t only make the customer feel safe and secure when transacting, it can also culminate in a returning customer down the line.  

“Renowned merchants such as Makro, Uber Eats, Mr D as well as The Foschini Group have all made use of our Refunds product”, says Chiwara.

“One merchant already using our Refunds system also mentioned that ‘with the large volumes we process in refunds, the Ozow Dashboard provides great visibility to the business on status of customer transactions’”

“While another merchant added that ‘the key reason for switching to the Ozow solution is the cost per refund and the speed with which the refunds are processed’” he continues.  

If you’d like to know more about our Refunds product, don’t hesitate to contact us at If you’d like to find out more about how we can help your business prepare for a successful future, then find out more from our insightful blogs here.

Staff Writer

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