For example, a recent coupon fraud case filed against coupon clearinghouse alleged a complex fraudulent coupon redemption scheme netting over 0 million.
The second opportunity for fraud in the coupon redemption process lies in the practice of shipping coupons to the manufacturer or the manufacturer's representative (the clearinghouse) for reimbursement, without controls for authenticating the number of, and value of, the coupons shipped.
However, even more significant problems stem from two major opportunities to commit fraud in the traditional prior art coupon redemption process.
Simple cases of fraud arise when consumers intentionally submit to retailers expired coupons or coupons for products, sizes, quantities and/or combinations thereof that were not actually purchased by the consumer during the purchase transaction.
Moreover, not only is the traditional prior art paper coupon redemption process costly and time-consuming, it also is replete with opportunities to defraud manufacturers and retailers on many levels.
Thus, prior art coupon redemption systems are inefficient and uneconomical.
The manufacturer generally reviews the coupons for evidence of fraud (for example, large numbers of similarly and evenly cut coupons, similar cuts and tears, consecutive numbering, counterfeits and/or any other irregularities as published by the Joint Industry Coupon Committee (“JICC”)Such irregularities, as provided by the JICC, can include: (a) Store Sold or Closed; (b) No Store at this Address; (c) Coupon Appearance; (d) Counterfeit; (e) Consecutively Numbered; (f) Gang-cut; (g) Similar Cuts & Tears; (h) Washed; (i) Wrinkled; (j) Expired Coupons; (k) Abnormal Coupon Mix; (l) Proof of Purchase Required; (m) Excessive Coupon Volume; (n) Does Not Stock Product; (m) Out of Coupon Distribution Area; (o) Non-Coupons; (p) Billed to Incorrect Address Or Mfg.; (q) Invoice Calculation Error; (r) Claimed Coupon $ Exceeds Mfg stated; (s) Overage; (t) Shortage; (u) Illegible Tags; (v) Excessive Postage/Insurance; (w) Ineligible in-Ads; (x) Mfg.
The clearinghouse then sorts the coupons by manufacturer and retailer and forwards the coupons to the appropriate manufacturers along with an invoice for payment.
This is known as a “chargeback.” However, in an effort to combat such chargebacks, some retailers will deduct the amount of the chargeback from the retailer's future payments to the manufacturer for products delivered to the retailer.
If some coupons are deemed invalid by the manufacturer, for lack of proof of purchase or otherwise, the retailer will not be reimbursed for such coupons.
The present invention comprises a universal coupon redemption system and method for redeeming both paper and electronic coupons that eliminates fraud. The POS system upgrades required to meet the coupon industry's efforts to reduce fraud are expensive and, in many cases, cannot be met by smaller retailers due to the financial burden.
The system and method provides verification, validation and authentication of coupon redemption transactions in a third party environment while eliminating the need to ship coupons to manufacturers for reimbursement. Thus, the very efforts the coupon industry is taking to combat fraud and reduce overall costs are, ironically, creating greater cost for the retailers.
In one embodiment, the system and method also advantageously addresses the increasingly complex identification of coupons by removing the encoded redemption requirements from the coupon itself and moving the redemption requirements to a third party coupon processing appliance.1. What is needed, therefore, is a simpler, cost-effective universal coupon redemption system and method that provides a solution for coupon fraud.