Holiday refunds surge, squeezing global retail margins

Refund volumes in global retail rose 18.1% in 2025, outpacing the growth in refund value and adding pressure to retailers' margins as return activity clustered around the holiday season, according to new analysis from ACI Worldwide.

ACI said refund value increased 12.7% year on year. The company based its findings on an analysis of billions of global retail transactions processed across 2024 and 2025.

The data points to a widening operational challenge for retailers as online sales volumes rise and return rates remain elevated. ACI also estimated that every USD $1 million in refunds carries a broader cost of around USD $1.3 million once other factors add up.

Holiday spike

Refund activity peaked during the holiday season. November and December together accounted for about 20% of all refunds in 2025, ACI said.

December recorded a 2.89% refund rate, according to ACI's analysis. That compared with an average refund rate of 2.25% from January through October. November's refund rate was 2.28%.

The figures place the year's average refund-to-payment ratio in a range of 2.5% to 3%, according to ACI. It linked the holiday period to extended return windows and higher fraud risk.

Costs stack up

ACI's analysis put a number on the broader cost burden of returns. It said reverse logistics, inventory depreciation, payment processing fees, and fraud-related overheads add to the cost of issuing refunds.

On that basis, ACI estimated that USD $1 million in refunds typically translates into around USD $1.3 million in total costs. The figure suggests that refund programmes can affect profitability beyond the refunded amount shown in revenue reporting.

The data also points to a shift in the composition of returns. Refund transactions increased faster than refund value. That indicates higher refund frequency with lower average refund values, based on ACI's year-on-year comparison.

Online growth

The findings sit alongside continued growth in global eCommerce. Across all retail sectors, ACI said eCommerce transaction volumes grew 28.3% in 2025. It said total transaction value increased 34.3% year on year.

ACI attributed that growth to consumer demand for convenience, sustained innovation across the retail ecosystem, and rising levels of consumer trust. The company also said that refund rates rose more slowly than eCommerce transactions, even as their financial impact remained significant.

Fraud focus

ACI said retailers are rethinking how they manage returns and fraud as refund volumes rise. It described a mix of measures that retailers are adopting or considering.

Those measures include AI-driven identity verification and real-time monitoring, according to ACI. It also cited tighter and more adaptive return policies.

ACI said merchants increasingly apply real-time analytics that they have used for fraud prevention to refund and return activity. The company characterised this approach as a response to refund abuse. It also noted a need to keep the experience smooth for customers who make legitimate returns.

ACI framed the holiday period as a stress point for retailers as return volumes rise and return windows lengthen. It said this combination increases exposure to fraud and increases the cost of processing returns at scale.

ACI sets out its view of the issue in a statement from its merchant payments team.

"The sharp rise in refund volumes is exposing a growing pressure point for retailers-one that directly threatens margins, especially during peak periods and extended return windows," said Adriana Iordan, Head of Merchant Product Management and Payments Intelligence, ACI Worldwide. "Retailers need smarter, AI‐driven controls that spot abuse in real time and adapt policies dynamically, without adding friction for genuine customers. By bringing fraud and refund management together, merchants can curb losses, protect profitability, and still deliver a customer seamless experience-even as refund volumes continue to climb," said Iordan.

ACI's report draws on payment transaction processing data from 2024 and 2025. The company said it expects retailers to keep tightening refund controls, with a focus on monitoring and policy changes during peak retail periods.