How Walmart & Others Plan to Catch Coupon Counterfeiters in the Act

It’s something you’d probably think should have happened a long time ago. But now, a couple of major retailers are working to modernize the archaic system of redeeming paper coupons – while catching coupon counterfeiters in the process.

Walmart and Michigan-based big-box chain Meijer have both filed patent applications, for scanning systems that will validate coupons on the spot, automatically determining if they’re legitimate or fraudulent.

You might think, they don’t do that already? As it turns out, the process of flagging fake coupons is far more primitive.

“South of the border, down Mexico way…”

Consider the path that your paper coupons typically take, after they’re scanned at the grocery store. The cashier stuffs them into an envelope. Someone in the back office collects them all, and ships them off to a coupon clearinghouse. The clearinghouse trucks them across the border to Mexico, where they’re sorted and counted by machines and by hand. Then they’re sent off to individual manufacturers, who reimburse the stores that accepted them.

It’s no wonder there are so many counterfeit coupons out there – by the time someone discovers the fakes, weeks or months have passed. And the culprit is long gone.

Third-party systems to help catch counterfeits at the point of sale do exist. But Meijer and Walmart are believed to be the first major retailers to develop their own proprietary systems to automate the process and validate coupons right at the checkout.

Meijer puts counterfeiters on notice

In its recently published patent application, “System and Method for Automatically Detecting and Rejecting Fradulent Coupons,” Meijer describes how its method would work. The store’s scanners would compare each scanned coupon against a constantly-updated database provided by a “third-party source of fraudulent coupon information” (in Meijer’s case, the source would be the coupon processing company Inmar). If “a match between the captured print media coupon and a fraudulent coupon in the fraudulent coupon data file is found,” the application reads, “the processor rejects the captured print media coupon.”

So even if a counterfeit coupon has a scannable bar code and looks legit, if Meijer’s system flags it as a fake, it will be rejected and handed back to the customer. And that customer might even face a few questions about where they got that coupon anyway.

It sure beats the old-fashioned way – printing out the thousands of counterfeit coupon notifications issued by the Coupon Information Corporation, posting them on the break room wall and hoping that all the cashiers will memorize and recognize them if any happen to show up. The CIC does offer an electronic spreadsheet version of its counterfeits list, but Meijer’s patent application proposes a system that checks for counterfeits automatically, against an up-to-the-minute database.

Walmart battles “errors, discrepancies, and other inefficiencies”

Walmart’s system does Meijer’s one better. Not only would it catch counterfeits, but it would automatically validate and process the legitimate ones – eliminating the need to ship piles of paper coupons from the store, to the clearinghouse, to the manufacturers.

Walmart’s own recently published patent application, “Methods and Systems for Automated Coupon Processing,” describes how cumbersome the current process is. “Paper coupons may need to be visually verified and/or manually keyed in by a store clerk, tasks that are not always done consistently or reliably,” it reads. “Also, paper coupons may be manually sorted, counted, verified and/or keyed into an accounting register in the back office, which can introduce errors, discrepancies, and other inefficiencies.”

So the world’s largest retailer is looking to implement the world’s most efficient coupon scanning system. All scanned coupons would be compared against both a fraudulent coupon database, and a valid coupon database. Known counterfeits will be rejected immediately, and legitimate coupons will be accepted and their information sent off for reimbursement right away. “Redemption data for each redeemed coupon is electronically transmitted from the point of sale to the clearing house, via the back office,” the application reads. The value of all electronically transmitted coupons will be tallied, and Walmart will be reimbursed accordingly.

For shoppers who’ve experienced headaches trying to use coupons at Walmart, a system that all but eliminates cashier involvement and doesn’t require them to eyeball your every coupon, could prove to be a positive development.

A third way

The systems described by Meijer and Walmart are not brand new ideas – they’re something that retailers, manufacturers and the coupon industry have been dreaming of and working on for a long time. They’ve just been waiting for the technology to catch up.

When it comes to combating coupon misredemption, “the most logical way to fix the problem is to block the redemption of invalid or counterfeit coupons at the point of sale,” read a 2012 paper by the coupon processing company ICN. “But can a retailer’s point-of-sale system actually do that? The answer today is no.”

But shortly afterwards, ICN developed a system to do just that, beating Walmart and Meijer to the punch by receiving its own patent. “We have validated over 16 million paper coupons in the past two years,” ICN founder Richard Thibedeau told Coupons in the News. ICN markets its “Coupon Validation Center” to individual retailers, promising that its “up-front validation stops erroneous and fraudulent tendering of coupons, and reduces or eliminates the need for costly back-end accounting for paper coupons.”

So while third-party technology to automatically validate coupons and catch counterfeits does actually exist now, it’s not yet widespread. That could change if Walmart, Meijer and other retailers start implementing their own systems in stores across the country.

“If it doesn’t scan, we can’t take it”

Such a move would also be another sign that retailers are ready to put a whole lot of faith in coupons’ new GS1 DataBar codes. The longer bar codes contain much more information, and are meant to help minimize cashier intervention. Instead of scrutinizing every coupon, cashiers can just scan them all and rely on the bar codes, the point-of-sale scanner and the coupon databases to do the work of determining whether coupons are valid.

Of course, that’s presuming that coupons’ DataBars are completely accurate. It also depends on these “third-party coupon databases” being comprehensive and accounting for every single known coupon out there. There’s nothing worse, after all, than handing over a completely valid coupon, seeing it rejected for unknown reasons, and having it handed back to you by a cashier who’s powerless or otherwise disinclined to do anything about it.

The good news, Thibedeau says, is that ICN’s system can “match a good code to a bad code.” So when an incorrectly-coded coupon is reported, ICN can instantly update its database to have the coupon scanned the way it’s meant to, so it no longer “beeps” at the register. ICN expects that the accuracy of bar codes will improve, as more retailers move to this type of system.

Coupon competition

But if a system like ICN’s already exists, why would stores like Meijer and Walmart be looking to essentially reinvent the wheel and come up with their own systems? Both retailers declined comment about their plans. But ICN says, the more the merrier. “There will be some big players who will say, we have the resources, we can build it ourselves,” ICN Advisory Board member Eric Williams told Coupons in the News. But “the more companies that are realizing the value of this kind of system, the better.”

Williams predicts the entire industry will move toward automated, paperless coupon processing in the next seven to ten years, though he says if everyone starts getting on board, it could happen even sooner. That would be bad news for coupon counterfeiters, and good news for the rest of us who complain that counterfeiters ruin it for everyone else. And if it works as intended, and legitimate coupons are not mistakenly rejected, it could make checking out with coupons a whole lot smoother in the future.

Just don’t tell the coupon sorters in Mexico – they may not be ready to hear yet, that their days could be numbered.

Image source: Walmart