Combating rebate fraud


Fraud has become more of an issue for many types of payment processes as technology has advanced, and incentive programs at the retail level are no different. According to a Fraud Guide report, without comprehensive incentive data management platforms, the process of claims validation processing can be extremely challenging for manufacturers and distributors.

Rebate fraud is more common than many manufacturers realize
A generally accepted rule is that incentive campaign fraud accounts for around two percent to three percent of the total claims. According to research by 360insights, the number of fraud cases is even higher at around four percent to seven percent. In fact, the firm recently had a major manufacturing client who had 11.7 percent of its $60 million incentive campaign wind up in fraudulent claims being submitted, detected and declined.

“There are two types of rebate fraud.”

Fraud detection
One of the priorities of any company is to operate better and generate more profitably. But an interesting challenge they often run in to is fraud detection. Listed below are a few of the most effective methods employed by 360insights on some of its recent client audits:

Serial numbers
The most effective method is to track claims data with serial numbers on goods sold. Serial numbers are a unique piece of data to be indexed and captured from the transaction because it can identify duplicates or off-format serial numbers used in fraudulent claims.

Store invoices
Store invoices are extremely valuable fraud detection pieces. These store invoices are one of the most accurate and effective ways to capture transaction data. They help detect suspicious claims based on different store invoice formats – other than what is used by the company – or invoice serial numbers that are out of line with claimed invoices that were submitted.

Mailing addresses
Capturing customer mailing address data on invoicing is another effective method. This can measure the customer’s geographic location versus the postal code of the store on claims submitted. Of course with e-commerce transactions, distance from the store is a common occurrence. But for those brick and mortar stores that do not cater to the online marketplace, mailing address data can be helpful for manufacturers to flag certain locations in the event of suspicious incentive claims.

Sales reps
Involving company field sales representatives is also a helpful detection method. Most sales reps are aware of top producers on retail accounts, so this goes a long way to detecting fraudulent claims.

These are just a few examples of fraud detection. But incorporating these methods can remove some of the guesswork in fraud claims investigations by removing the process of random audits.