Almost a third (30%) of UK consumers are spending less online because refunds take too long, and they’re worried about their bank balance, a new study by open banking platform Tink has found.
The research was conducted by Censuswide on behalf of Tink, it surveyed over 2,000 UK consumers and around 500 senior decision makers of merchants with an online presence.
It found over half (52%) of shoppers are less likely to shop with a retailer again if a refund takes a long time to receive.
According to Tink, struggling consumers are slashing their online spending due to these return delays. While, retailers are losing out on valuable revenue and repeat business as a result of lengthy refunds processes.
Merchants struggle with cost of returns
Tink stressed retailers are anticipating a difficult year ahead, with many struggling to handle rising costs and falling sales. Its survey revealed that four in ten (40%) retailers are focusing on cutting costs as a result of the current economic environment.
One area in particular which is flagged as a drain on business is returns, with over half (54%) of online retailers saying they are or expect to be forced to stop offering free returns as a result of the economic climate.
Particular pain points for merchants include the cost of processing returns (43%) and the length of time that it takes for a customer to get their money back (40%). But with the returns process being a key differentiator for consumers, online merchants risk adding even more friction to the experience and damaging customer relationships if they begin charging for returns.
Encouragingly, survey findings suggest that a significant number of forward-thinking retailers understand that getting refunds right is an essential part of improving the returns process for shoppers and merchants alike. Indeed, over a third (36%) believe that instant refunds would enhance the customer experience of returns while 32% feel they would ultimately reduce the returns cost to their business.
New payment method offers solution to refund conundrum
Tink said it’s clear that there is considerable appetite from online merchants to overhaul the returns and refunds process. Four in ten (39%) would like to see the cost of handling refunds reduced, while one in three (33%) would value a payment method that offers real time refunds to customers when they return an item.
The good news for both merchants and consumers is that such a payment solution exists: Pay by Bank.
Powered by open banking, Pay by Bank holds obvious advantages for retailers looking to optimise the returns and refunds process — removing some of the cost and hassle from the returns process. And from a consumer perspective it allows their money to be instantly refunded into their account as soon as a return is processed, removing friction and significantly boosting customer experience.
Tom Pope, head of payments and platforms at Tink, said: “It’s clear that the UK’s online retailers are facing the twin challenges of rising costs and meeting consumer expectations when it comes to returns and refunds. As a result, they risk missing out on vital revenue and repeat business in an increasingly difficult operating environment. In order to turn returns into a competitive advantage in 2023, they can invest in payment solutions that speed up the refunds process and, in turn, boost shopper spend, improve retention and enhance customer experience.
“Pay by Bank holds the key to overcoming the ‘refund conundrum’ – helping to cut costs associated with returns for merchants and increasing the speed of refunds from days to seconds for consumers. It’s a win-win.”