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BizReport : Ecommerce : February 29, 2016

How to combat coupon fraud

Coupons continue to be a strong tool for retailers to use both online and offline, but in the digital space, coupon fraud is becoming a bigger problem.

by Kristina Knight

Kristina: How big a problem is coupon fraud?

Cheryl Black, CEO of YOU Technology: We often view it as a subtle issue, but it's a problem that's costing U.S. retailers and manufacturers hundreds of millions of dollars in lost revenue each year. These numbers are pretty astonishing considering coupon fraud is often considered the scam nobody talks about.

Kristina: What is pushing coupon fraud?

Cheryl: Creating and using counterfeit coupons has never been easier due in large part to today's technology and high turnover of checkout clerks. Barcodes are easy to create, high-quality artwork and graphics can be rendered in the blink of an eye and high-resolution scanners can copy almost anything quickly and efficiently.

Kristina: What can retailers do to combat coupon fraud?

Cheryl: The solution to coupon digital coupons. Digital coupons wipe out the problem and put the money back in the pockets of retailers and manufacturers.

When we say 'digital coupons,' this doesn't mean general coupons that can be printed from a website. These coupons never exist as paper or other hard-copy form during their entire life cycle, so there's no presentation of a barcode and they can't be copied and distributed. Digital coupons must be set up in advance to work at a point of sale (POS) and must be selected or taken by a consumer and associated with his or her loyalty card or other ID to allow the retailer to uniquely identify her when she shops. This solution is already in practice today and has the potential to save would-be lost dollars due to fraud.

Kristina: How can digital coupons help to combat coupon fraud?

Cheryl: Digital coupons are essential to reducing fraud and increasing security. With digital, counterfeiting isn't an issue. The coupon won't work unless it's a legitimate coupon that's been set up in advance. The same applies to copied coupons: A "copy" won't work. Retailers no longer have to worry about people reusing coupons. Digital coupons are set up to work the exact number of times per person that they are meant to be.

Digital coupons also ensure that discounts are only being issued for the exact UPCs of the products covered by the coupon. There are no generic family codes. Expired coupons also become nonexistent in this case. Digital coupons can also help combat return fraud. They allow returns at the transaction level to be net of coupons, but this is determined by the store return policy.

The sooner businesses are able to offer digital coupons, the faster they will be able to save millions of dollars annually in revenue.

Image via Shutterstock

Tags: coupon fraud, digital coupons, ecommerce, ecommerce trends, YOU Technology

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