Revealed - more than £3.5 Billion Held Hostage in Online Refunds over the Past Year
- Open Banking
- 23.09.2021 12:30 pm
- Nearly half (40%) of consumers wait for ecommerce refunds for between 3 to 5 days.
- This delay has negative implications for consumers: 28% have been directly impacted in their ability to pay for bills, rent and mortgage payments
- 28% of 18- to 24-year-olds impacted in their ability to pay for food
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 from Trustly, the leading global payments platform for digital account-to-account transactions.
The data — which follows on from a year in which ecommerce 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.
William McMullan, Director of eCommerce at Trustly, comments: “Online retail moves quickly, but unfortunately our financial systems can be quite slow. When consumers are denied fast refunds from merchants unnecessarily, it impacts on their ability to manage their expenditure. It’s not surprising to find that many are struggling”.
“We’re seeing increasing demand from consumers for debit payment options. Our research from earlier this year highlighted that 71% of UK shoppers now prefer to pay via debit. Consumers want the reassurance that their choice of payment method isn’t going to land them in debt. As consumers look to gain more control over their spending, debit payments facilitate this layer of flexibility with more convenient refunds, one click-payments, scheduled payments and a better customer experience. e-Tailers need to adapt and offer this flexibility. Relying on legacy systems and age-old processes will see merchants get left behind. Faster refunds get shoppers back online sooner and more often. That’s good for shoppers and good for retailers,” added McMullan.
There’s a clear demand for instant refund processes to be put into place. The data found that 63% of those surveyed are more likely to spend money with the same provider, if they receive a refund quickly.