Introduction to Retail Shrinkage: The Silent Thief of Profitability

In the retail industry, there is a pervasive and insidious issue that silently erodes profitability, undermines operational efficiency, and poses a significant threat to the very survival of businesses. This phenomenon is known as retail shrinkage, a term that encompasses the loss of inventory and revenue due to a variety of factors, including theft, human errors, fraud, and administrative mistakes.
Retail shrinkage is not just a minor nuisance; it is a multi-billion dollar problem that affects retailers globally. According to the National Retail Federation (NRF), retail inventory shrinkage costs the industry a staggering $46.8 billion annually, accounting for approximately 1.33% of total sales[2][3][5].

The Causes of Shrinkage
The sources of retail shrinkage are diverse and complex. Here are some of the primary causes:
- Shoplifting: This includes both opportunistic theft by individual customers and organized retail crime, where professional thieves target high-value items and exploit security vulnerabilities. Shoplifting alone accounts for a significant portion of total shrinkage, with customer shoplifting responsible for around 37% of retail shrinkage[5].
- Employee Theft: Internal theft, or employee theft, is another major contributor. Employees may steal goods, cash, or misuse services, with complex schemes involving refund and discount fraud being particularly damaging[2][3].
- Administrative Errors: Human errors in record-keeping, mislabeling of products, and other administrative mistakes can lead to discrepancies between recorded and physical inventory levels. These errors can be unintentional but still result in significant losses[2][5].
- Vendor Fraud: Suppliers or vendors may engage in fraudulent activities such as delivering damaged goods, incorrectly billing for undelivered products, or substituting inferior products. These actions can lead to inventory losses and financial discrepancies[2][5].
- Product Damage and Waste: Damaged products during transportation, handling, or display, as well as perishable items that expire or spoil before they can be sold, also contribute to shrinkage. These issues not only result in direct revenue loss but also incur additional costs for disposal and replacement[1].

The Impact on Retailers
The consequences of retail shrinkage are far-reaching and can have a profound impact on a retailer's bottom line. Here are some key effects:
- Reduced Profitability: Shrinkage directly reduces the amount of inventory available for sale, leading to lost revenue and lower profits. Retailers often attempt to offset these losses by increasing prices, which can negatively impact customer relationships and sales[2][3][5].
- Operational Inefficiencies: Managing shrinkage requires significant resources, including time and money spent on inventory audits, security measures, and employee training. This can divert attention from other critical business operations[1][3][4].
- Strategic Adjustments: In response to high shrinkage rates, retailers may alter their business strategies, such as changing product offerings, reducing store operating hours, or even closing locations. These adjustments can have broader implications for employees and customers[2].

The Need for Action
Given the magnitude and complexity of retail shrinkage, it is imperative for retailers to implement effective strategies to mitigate these losses. This includes investing in advanced technologies like RFID tags and electronic article surveillance (EAS) systems, enhancing inventory management processes, and fostering a culture of loss prevention among employees.
In this blog post, we will delve deeper into the causes of retail shrinkage, explore the various types of shrinkage, and discuss comprehensive strategies that retailers can employ to reduce these losses and protect their profitability. By understanding and addressing the root causes of shrinkage, retailers can take proactive steps to maintain a healthy bottom line and ensure the long-term sustainability of their businesses.

Citations:
[1] https://www.trigoretail.com/index/retail-shrinkage/
[2] https://passby.com/blog/retail-shrinkage-types-causes/
[3] https://www.shopify.com/uk/retail/retail-shrinkage
[4] https://www.ecrloss.com/research/measuring-retail-shrinkage/
[5] https://www.extendaretail.com/resource/spotlight-on-retail-shrinkage/
[6] https://www.investopedia.com/terms/s/shrinkage.asp
[7] https://www.cognizant.com/uk/en/insights/blog/articles/from-shrink-to-strength-rransforming-the-challenge-of-retail-shrinkage-into-opportunity
[8] https://www.deloitte.com/uk/en/Industries/consumer/blogs/the-future-of-shrink-the-increase-of-shoplifting.html

Introduction to Fraud in Deposit Return Schemes: A Growing Concern

Deposit Return Schemes (DRS) have been implemented in various countries as a mechanism to encourage the recycling of beverage containers and reduce litter. However, alongside the environmental benefits, these schemes have also exposed vulnerabilities to fraud, which can significantly undermine their effectiveness and financial sustainability.

The Nature of Fraud in DRS

Fraud in DRS can manifest in several forms, each posing unique challenges for the operators and stakeholders involved.
- Cross-Border Fraud: One of the most significant risks is cross-border fraud, particularly in regions where DRS systems are not uniformly implemented. For example, when Germany introduced its DRS, there were instances of lorry loads of bottles being brought in from Poland to claim deposits fraudulently. To combat this, Germany introduced hi-tech labels to verify the authenticity of the containers[2].
- Producer and Supplier Fraud: There is a risk of producers falsifying data regarding deposits paid or using foreign suppliers to bypass the system. This type of fraud can lead to significant financial losses for the scheme operators and compromise the integrity of the system[2].
- Consumer Fraud: Consumers may attempt to return out-of-scope containers or containers that have not had a deposit paid on them. Manual collection points are particularly susceptible to this type of fraud, as they rely on staff to verify the eligibility of the containers, which can be time-consuming and prone to errors[2].
- Technological Exploitation: While technology is often seen as a solution to fraud, it can also be exploited. For instance, in some trials, participants have tested the system by intentionally leaving items like stones in cans to see if the machines would detect them. Such actions highlight the need for robust and reliable technological solutions[4].

Real-World Examples and Data
Several real-world examples and studies provide insight into the extent and impact of fraud in DRS.
- German Experience: When Germany first implemented its DRS, it faced significant fraud issues, including cross-border fraud. The introduction of hi-tech labels helped mitigate this problem, but it remains a challenge[2].
- Scottish Concerns: In Scotland, there are concerns about the potential for fraud with the upcoming DRS. Industry experts have highlighted the risk of criminals selling stock to retailers that has not had a deposit paid on it, which could undermine the system's credibility and financial stability[2].
- Brecon Trial: In contrast, a digital deposit return scheme trial in Brecon, Wales, reported no significant fraud or misuse of the system. This trial used advanced technology to digitally scan containers and reward participants, suggesting that well-designed technological solutions can help minimize fraud[3].
 

Economic and Operational Implications
The economic and operational implications of fraud in DRS are substantial. Here are some key points:
- Financial Costs: Fraud can result in significant financial losses for scheme operators. The costs of combating fraud, including the implementation of advanced technologies and duplicate supply chains, can be high and may not be fully offset by the funds generated from unredeemed deposits[2].
- Operational Challenges: Managing fraud requires additional resources, including time and money spent on security measures, employee training, and technological upgrades. This can divert attention from other critical aspects of the DRS and increase operational complexities[2].

Fraud in Deposit Return Schemes is a critical issue that needs to be addressed to ensure the long-term success and sustainability of these programs. By understanding the various forms of fraud, learning from real-world examples, and implementing robust technological and procedural measures, stakeholders can mitigate these risks and maintain the integrity of the DRS.

For a deeper dive into the measures to mitigate fraud, the report by Eunomia on "Managing Risk and Mitigating Fraud in Deposit Refund Systems" provides comprehensive insights and examples from both North American and European systems[1]. Additionally, articles from The Grocer and the results from the Brecon trial offer practical examples and data on the challenges and potential solutions to fraud in DRS[2][3].

Citations:
[1] https://eunomia.eco/reports/managing-risk-and-mitigating-fraud-in-deposit-refund-systems/
[2] https://www.thegrocer.co.uk/analysis-and-features/deposit-return-schemes-is-the-bottle-spinning-out-of-control/598004.article
[3] https://www.gov.wales/results-worlds-first-full-town-digital-deposit-return-scheme-trial-are
[4] https://techbuzzireland.com/2024/04/08/deposit-return-scheme-re-turn-review-in-ireland/
[5] https://www.shopify.com/uk/retail/retail-shrinkage
[6] https://passby.com/blog/retail-shrinkage-types-causes/
[7] https://www.extendaretail.com/resource/spotlight-on-retail-shrinkage/
[8] https://www.trigoretail.com/index/retail-shrinkage/

The Importance of Traditional Deposit Return Schemes with Quality Reverse Vending Machines

While the concept of a Digital Deposit Return Scheme (DDRS) may seem innovative, it introduces several complexities and challenges that can undermine the effectiveness and inclusivity of the deposit return system. Here are some key reasons why traditional Deposit Return Schemes (DRS) with high-quality Reverse Vending Machines (RVMs) remain the more viable and efficient option.

Complexity in Coding Containers
A DDRS requires each container to be uniquely coded, which adds a significant layer of complexity. This involves advanced technology at every stage of the production process, from manufacturing to distribution. The need to code every single container differently can be logistically challenging and costly, potentially leading to errors and inefficiencies[2].

Exclusion of Small Manufacturers
The technological requirements for a DDRS can be prohibitive for small manufacturers. Implementing the necessary coding and tracking systems at every bottling plant is a significant investment, which smaller businesses may not be able to afford. This could lead to a market where only larger manufacturers can participate, cutting out smaller players and reducing competition and diversity in the market.

High Technological Demands
A DDRS necessitates the integration of advanced technology at multiple points, including bottling plants, distribution channels, and collection points. This not only increases the initial setup costs but also the ongoing maintenance and support requirements. In contrast, traditional DRS with RVMs rely on simpler, yet effective, technologies that are easier to implement and maintain[5].

Unproven Efficacy
While the Brecon trial of a DDRS showed promising results in terms of consumer engagement and recycling rates, it is still an early experiment. The long-term efficacy and scalability of such a system are unknown, and there is a risk that it may not translate well to larger, more complex environments. Traditional DRS, on the other hand, have a proven track record of success in various countries around the world.

Fraud Prevention and Operational Efficiency

High-quality RVMs in traditional DRS are equipped with advanced sensors and identification systems that help prevent fraud and ensure accurate validation of returned containers. These machines can automatically sort and validate materials, reducing the risk of human error and fraudulent activities. This level of operational efficiency is crucial for maintaining the integrity and financial sustainability of the DRS[5].

Interoperability and Consistency
Traditional DRS with RVMs can be designed to be highly interoperable across different regions, ensuring a consistent user experience and reducing the risk of cross-border chaos. This is particularly important in the UK, where there is a push for aligned deposit levels and operational standards across England, Northern Ireland, Scotland, and Wales to ease consumer participation and business compliance[4].

Given the complexities, exclusions, and unproven efficacy associated with DDRS, traditional Deposit Return Schemes with quality Reverse Vending Machines remain the most practical and effective solution. These systems offer a proven track record of success, are more inclusive for all manufacturers, and provide a simpler yet robust mechanism for promoting recycling and reducing waste. By investing in high-quality RVMs, retailers and scheme operators can ensure a reliable, efficient, and fraud-resistant DRS that benefits both consumers and the environment.

Citations:
[1] https://www.thegrocer.co.uk/analysis-and-features/deposit-return-schemes-is-the-bottle-spinning-out-of-control/598004.article
[2] https://www.gov.wales/results-worlds-first-full-town-digital-deposit-return-scheme-trial-are
[3] https://help.urbanevolutionlettings.co.uk/knowledge/what-is-the-difference-between-a-traditional-dps-deposit-and-reposit
[4] https://www.gov.uk/government/publications/deposit-return-scheme-for-drinks-containers-policy-statements/deposit-return-scheme-for-drinks-containers-joint-policy-statement
[5] https://sensoneo.com/waste-library/deposit-return-scheme-explained/
[6] https://mashroom.com/blog/guide-for-tenants-replacement-vs-traditional-deposit-schemes-7317
[7] https://mashroom.com/blog/deposits-traditional-or-replacement-your-options-explained-7313
[8] https://consult.defra.gov.uk/environment/consultation-on-introducing-a-drs/supporting_documents/Impact%20Assessment.pdf

The Critical Role of Advanced Technology in Reverse Vending Machines: Preventing Fraud in Deposit Return Schemes

In a Deposit Return Scheme (DRS), the integrity of the system relies heavily on the ability of Reverse Vending Machines (RVMs) to accurately process and validate returned containers. If consumers find ways to fraudulently manipulate these machines, it can lead to a significant economic problem for the scheme operator. The core issue arises when more deposits are redeemed than were initially paid upon purchase, disrupting the delicate balance between collected and redeemed deposits.

Economic Implications and Operational Challenges
From an economic standpoint, this imbalance can be devastating. Scheme operators must meticulously manage the funds collected from deposits versus the amount redeemed to ensure the financial sustainability of the DRS. If fraud becomes rampant, the operator may face substantial financial losses, which could compromise the entire program. Moreover, the operational challenges of dealing with fraudulent activities divert valuable resources away from the primary goal of promoting recycling and reducing waste.

Retailer Responsibility and Technological Standards
Retailers play a crucial role in maintaining the integrity of DRS by ensuring that the RVMs they deploy are equipped with advanced technologies that prevent fraud. Acquiring low-technology RVMs from unverified sources, such as cheap Chinese or Turkish machines, can exacerbate the problem. These machines often lack the sophisticated sensors, identification systems, and data tracking capabilities necessary to detect and prevent fraudulent activities.

The Importance of High-Quality RVMs
To effectively prevent fraud, retailers must invest in RVMs from reputable businesses with a proven track record in research and development. These machines are a complex mix of several technologies, including advanced sensors, barcode scanners, shape and material detectors, and secure reward systems. High-quality RVMs not only ensure accurate validation of returned containers but also provide real-time data tracking and monitoring, enabling swift action against any suspicious activities.

Consequences of Non-Compliance
If a retailer is found to be using RVMs that facilitate fraud, the scheme operator will likely implement severe actions. This could include penalties, termination of participation in the DRS, or even legal proceedings. Therefore, it is imperative for retailers to prioritize the purchase of RVMs from respected manufacturers that have invested heavily in R&D to ensure their machines meet the highest standards of fraud prevention.
By choosing advanced, high-quality RVMs, retailers can contribute significantly to the success and integrity of the DRS. This not only helps in maintaining the economic balance of the scheme but also fosters a trustworthy environment that encourages consumer participation and supports the overarching goal of increasing recycling rates and reducing waste.

Leveraging Technology in Reverse Vending Machines to Combat Fraud in Deposit Return Schemes

Deposit Return Schemes (DRS) have been increasingly adopted as a powerful tool to enhance recycling rates and reduce waste, but they also present vulnerabilities to fraud that can undermine their effectiveness and financial sustainability. To address these challenges, advanced technologies integrated into Reverse Vending Machines (RVMs) play a crucial role in reducing and avoiding fraud within DRS.

Advanced Sensors and Identification Systems
RVMs are equipped with sophisticated sensors and identification systems that help in accurately verifying the materials deposited. These machines use barcode scanners, shape and material sensors, and weight sensors to ensure that only eligible containers are accepted and rewarded.

Automated Sorting and Validation
The automation in RVMs minimizes human intervention, which is a common source of errors and fraud. By automatically sorting and validating the materials, these machines reduce the likelihood of incorrect or fraudulent deposits.

Secure Reward Systems
RVMs offer various secure reward systems that help in preventing fraud. These include the issuance of paper tokens, digital vouchers, or even direct transfers via QR codes and mobile banking apps. These methods ensure that rewards are accurately and securely delivered to the consumer, reducing the risk of fraudulent claims.
Data Tracking and Monitoring

Modern RVMs are capable of tracking and monitoring the deposited containers in real-time. This data can be used to identify patterns of potential fraud and take preventive measures. For example, if a machine detects an unusually high number of deposits from a single user or location, it can trigger an alert for further investigation.
Cross-Border Fraud Mitigation
To combat cross-border fraud, RVMs can be equipped with hi-tech labels or unique identifiers that verify the authenticity of the containers. This ensures that only containers from within the designated region or country are accepted, preventing the fraudulent return of containers from other areas[4].

Enhanced User Experience and Transparency
By providing a transparent and user-friendly experience, RVMs build trust among consumers and reduce the incentive for fraudulent activities. The use of large digital screens and clear instructions helps in guiding users through the process, minimizing confusion and the potential for misuse
In this section, we will delve deeper into the technological features of RVMs and how they are designed to mitigate fraud in Deposit Return Schemes. By understanding these advanced technologies, we can better appreciate the role of RVMs in maintaining the integrity and effectiveness of DRS.

Citations:
[4] https://www.thegrocer.co.uk/analysis-and-features/deposit-return-schemes-is-the-bottle-spinning-out-of-control/598004.article
[8] https://www.gov.wales/results-worlds-first-full-town-digital-deposit-return-scheme-trial-are 

How Reverse Vending Machines technology prevents fraud.

As Deposit Return Schemes (DRS) continue to gain momentum globally, the opportunity for fraud has also increased, especially through reverse vending machines (RVMs). Consumers may attempt to exploit these systems through physical fraud methods, such as manipulating the container validation process, using counterfeit barcodes, or even reprocessing containers multiple times. These fraudulent activities can lead to significant financial losses, undermining the environmental goals of recycling programs. However, Recyclever is at the forefront of combating these issues. By incorporating advanced technologies such as high-speed sensors, torque monitoring, and AI-driven computer vision, Recyclever’s RVMs are designed to detect and prevent fraudulent activities in real-time. From identifying containers that have already been processed to verifying the authenticity of returned items, Recyclever's dual-layer fraud prevention system ensures that only legitimate returns are accepted. This innovative approach not only enhances the accuracy and reliability of the refund process but also protects the integrity of the entire DRS, contributing to a more sustainable and fraud-free recycling system.

Fraud #1 - Pullback (fishing line)

In the context of reverse vending machines (RVMs), one potential method of fraud involves exploiting the machine’s validation and processing sequence. This method takes advantage of the system's reliance on real-time sensor feedback and timing.
The fraud process begins when a consumer attaches a thin, nearly invisible fishing line to the cap of the container, often a plastic bottle or can. The consumer places the container into the RVM for validation, where the machine typically performs an initial scan to check for authenticity, cleanliness, and whether the container matches the acceptable parameters, such as material type and shape. The RVM will often use a combination of visual sensors (cameras or scanners) and weight sensors to confirm the integrity of the container.
Once the machine begins to process the container, including checking its barcode and material, the fishing line is then subtly pulled. As the machine performs the validation and begins the processing steps, the consumer quickly retracts the fishing line, causing the container to be pulled backward. Because of the high-speed processing and the machine’s reliance on sensors that are unable to track the container's movement in real-time, the system often fails to recognize that the container has been withdrawn before the transaction is fully completed.

 The key element in this scam is the timing: by retracting the container just before the machine fully processes the validation and awards the refund, the fraudster exploits a gap in the machine’s ability to detect and track rapid movements. Since the RVM doesn't typically re-check the position of the container once it’s passed the initial validation stage, the machine records the container as accepted, and the user can still receive the refund for the container, despite the fact that it has never actually been deposited.

 This type of fraud takes advantage of limitations in the sensor systems, such as slower detection rates or the inability to track a container after it enters the machine's processing area. However, modern RVMs incorporate more sophisticated technology to combat this kind of exploitation. These machines now use a combination of high-speed motion sensors, improved optical scanning systems, and sophisticated software algorithms to track objects more accurately and in real time. Additionally, multiple stages of checks and re-checks are built into the processing flow to catch discrepancies such as this.

The Recyclever reverse vending machine (RVM) is specifically designed to counteract sophisticated fraud attempts, such as the method involving the use of fishing lines to withdraw containers at high speed after initial validation. Our system employs a dual-layer of high-precision sensors, advanced monitoring, and real-time processing to detect and prevent fraudulent behavior with unparalleled accuracy.

1. Recycever anti-fraud

High-Speed Sensor Array and Positioning System

Our RVM integrates a meticulously placed network of high-speed sensors, designed to work in tandem with one another to detect even the slightest movement of the container. These sensors are strategically positioned across the container's entry, processing, and compaction zones. By utilizing infrared sensors, high-resolution cameras, and motion detectors, the machine can track the exact position of the container in real time.
The sensors operate with sub-millisecond response times, enabling the system to detect rapid changes in the position of the container, such as when the container is pulled backwards at high speed. The sensor array is calibrated to recognize not only forward movement but also any reverse motion that occurs after the container enters the validation and processing stages. Thanks to the combination of advanced lighting systems and fast reading capacity, the system can detect minute discrepancies in container trajectory that would otherwise go unnoticed in slower-response systems.
This real-time data allows the system to immediately identify if a container is retracted prematurely, even if the user attempts to pull it back just before the refund is processed. The sensor array can detect these shifts and immediately flag the action as anomalous.

2. Recycever anti-fraud

Torque Monitoring in the Compaction System

To further strengthen the security of the validation process, our system incorporates a torque monitoring mechanism within the compaction unit. As the container passes through the compactor, the machine continuously monitors the amount of torque applied to the container. Torque is a measure of rotational force, which is directly related to the physical effort required to compress the container.
Since the compaction process is carefully calibrated to exert a specific amount of force, any discrepancies in the expected torque values can indicate that the container was not fully processed as it should have been. If a fraudster attempts to retract the container before it has gone through the full compaction cycle, the machine will detect that the torque values deviate from the expected norm. The machine cross-references this data with the sensor readings to ensure that the container has passed completely through the compactor.
If the system detects that the expected torque was not applied in full, indicating that the container was not properly compacted, the machine will flag the transaction as invalid. Only when the container has fully passed through the compactor and the correct torque values are recorded will the system proceed to the next step in the process—issuing the refund voucher.

3. Recycever anti-fraud

Dual-Layer Fraud Prevention

By combining these two robust systems—high-speed sensor arrays for real-time movement detection and torque monitoring within the compaction mechanism—we establish a double layer of fraud prevention. The first layer, the sensor array, ensures that no container can be withdrawn prematurely without being detected. The second layer, the torque monitoring, confirms that the container has been properly processed, eliminating any chance that the system could mistakenly issue a refund for a container that never went through the compactor.
This dual-validation mechanism is one of the most advanced fraud-prevention technologies in the reverse vending machine industry, providing a powerful safeguard against the fishing line method and similar fraudulent attempts. With this system in place, the Recyclever RVM guarantees both the accuracy of its transaction process and the integrity of its environmental contributions, ensuring that each container returned is accounted for correctly.

Fraud #2 - Barcode replication

Another method of fraud that has been attempted with reverse vending machines (RVMs) involves the unauthorized use of barcodes to falsely claim a refund. In this case, consumers exploit the system by obtaining a barcode from an eligible container, either by photographing it directly or downloading it from online sources. The fraudster then prints this barcode on a piece of paper, often rolling it up into a small cylinder, such as one made from a kitchen roll or toilet paper core. This rolled paper is then inserted into the RVM, under the assumption that the machine will accept the barcode and process the transaction as if it were a legitimate container.

This method relies on the assumption that the RVM’s scanning technology will simply read and validate the barcode, triggering the refund process without verifying the authenticity of the physical container. By using a printed barcode on a roll of paper, the consumer hopes to deceive the system into awarding a refund for a non-existent deposit, bypassing the need to return an actual eligible container.

Despite the seemingly trivial nature of this method, it represents a clear attempt to exploit the RVM’s reliance on barcode scanning as a primary validation method. The action of rolling the paper into a cylinder mimics the physical characteristics of a valid container, misleading the system into processing a fraudulent refund.
The Recyclever reverse vending machine (RVM) utilizes a comprehensive multi-layered validation system to prevent fraud attempts such as the use of counterfeit barcodes printed on paper rolls or other non-container materials. This robust fraud prevention system combines material validation, dimensional checks, and computer vision to ensure that only genuine drink containers are accepted by the machine. Here's how each component works:

1. Recycever anti-fraud

Material Validation

When a barcode is scanned by the Recyclever RVM, the system first checks whether the barcode corresponds to a container made from an eligible material, such as PET or aluminium. Once the barcode is read, the system expects to detect the material type that matches the barcode's data. If the barcode corresponds to a PET container, for example, the machine will verify that the object presented is indeed made of PET. This ensures that a paper roll or any other object, regardless of whether it has a valid barcode, cannot pass the first step in the validation process.

2. Recycever anti-fraud

Dimensional Verification

Following the material check, the machine performs a second level of validation by measuring the dimensions of the object. The Recyclever RVM is equipped with advanced dimensional sensors that measure critical attributes such as the length and diameter of the container. This allows the system to verify that the object matches the expected size and shape of a drink container. For example, if the barcode corresponds to a 500ml PET bottle, the machine will expect the physical dimensions of the object to be consistent with that size. Objects like rolled-up paper, regardless of their printed barcode, will fail this dimension check as their physical properties do not align with the expected characteristics of a legitimate container.

3. Recycever anti-fraud

Computer Vision for Silhouette Detection

The third layer of validation involves computer vision technology, which enables the Recyclever RVM to examine the overall silhouette of the object. This system uses high-resolution cameras and image recognition software to ensure that the object presented to the machine is not only the correct size but also has the appropriate shape and features of a drink container. The machine looks for typical visual markers associated with beverage containers, such as necks, tops, and typical curvature for bottles or cans. If the system detects an object that does not resemble a valid drink container, it will immediately reject the item, even if the barcode and dimensions initially passed the checks.

4. Recycever anti-fraud

Multi-Layered Fraud Prevention

By combining these three sophisticated systems—material validation, dimensional verification, and computer vision—Recyclever’s RVM creates a comprehensive and fail-safe method for ensuring that only legitimate containers are accepted. This multi-layered approach prevents fraudsters from attempting to bypass the system with counterfeit barcodes or objects that do not meet the required physical characteristics, such as paper rolls or other fraudulent items. This combination of technologies provides a robust safeguard, ensuring the integrity of the reverse vending process and maintaining the reliability of the deposit return scheme.

Fraud #3 - Process unsold containers (with unpaid deposit)

Another form of fraud that has been attempted with reverse vending machines (RVMs) involves the return of an eligible container that has not been purchased by the individual using the machine. In this scenario, the container is technically within scope, meaning it meets the criteria for a valid refund—such as being made of an accepted material (e.g., PET or aluminium) and containing a valid barcode—but it has not been paid for, essentially stealing the deposit refund.
This type of fraud works as follows: the consumer retrieves an eligible container from the same store where the RVM is located. The container could be one that is still on display for sale or perhaps one that has been discarded. Since the container is eligible under the store's deposit return scheme, the individual believes they can return it to the machine to receive the deposit refund.
In this type of fraud, consumers attempt to return an eligible container—one that meets the required material and barcode specifications—but they have not actually purchased it. They might retrieve the container from the store, and because it meets the requirements for the deposit return scheme, the machine will typically accept it. However, the consumer has bypassed the intended transaction by not paying for the container.

Recycever anti-fraud

 Advanced Weighing Technology

To prevent this type of fraud, Recyclever has implemented a sophisticated weigh scale in the reverse vending machine (RVM) that plays a crucial role in ensuring that only genuine containers, which have been used and are eligible for a refund, are processed. The weigh scale checks if the container is empty or if it still contains liquid, as an unpurchased container might not have been used and could still contain its original contents.
This system is particularly advanced because it adapts to the environmental conditions that can fluctuate in different locations. For example, temperature and humidity changes can affect the weight readings. To account for these variations, the RVM’s onboard firmware continuously automatically updates the scale’s readings to maintain accuracy over time, ensuring that the system always provides reliable data.
While the system is designed to accommodate containers with and without caps (depending on the machine’s configuration) and allows for some residual liquid still being inside the container, Recyclever uses programmable logic-based thresholds. This allows the machine to adjust and fine-tune its detection process to minimize fraud while still offering a user-friendly experience. By setting these thresholds, the machine ensures that only valid returns are accepted, reducing the risk of false rejections and enhancing the overall efficiency of the system.

Fraud #4 - Reprocess already refunded containers

A particularly significant form of fraud that can occur with reverse vending machines (RVMs) involves reprocessing containers that have already been accepted by the machine. This type of fraud takes advantage of the system's reliance on the collection and processing of returned containers, where the containers are stored in bags or bins before being emptied by the machine's operators.
In scenarios where the public or staff members have access to these bags of processed containers, it becomes possible to manipulate the system. Fraudsters can retrieve containers that have already been processed by the machine, and by reintroducing them into the system, they can essentially duplicate the transaction. This creates the potential for the fraudster to receive multiple refunds for the same container, which could quickly lead to significant financial gains.
Retail staff, in particular, may have a more direct opportunity to exploit this loophole. Every time an RVM is emptied, the containers are typically collected and placed in bags for later recycling or disposal. If the staff are not properly monitored, they could easily take the bags of processed containers and reinsert them into the machine, claiming additional refunds in the form of vouchers, even though the containers have already been refunded. This could lead to substantial financial loss, as each fraudulent transaction may involve a large volume of containers, potentially worth hundreds of euros, pounds, or dollars in refunds.
This type of fraud is especially problematic in high-traffic locations where the volume of containers processed is high, and there is a greater opportunity for these bags of already-processed containers to be misused by individuals who are not following the proper procedures. The ability to recycle the same containers multiple times without the system detecting the repetition poses a serious risk to the integrity of the reverse vending process.

Recyclever’s advanced fraud prevention system addresses the critical issue of reprocessing containers that have already been accepted by the machine, a fraud type that could otherwise lead to significant financial losses. Our solution leverages a combination of computer vision, artificial intelligence (AI), and the powerful compactor to effectively detect and prevent such fraudulent activities.

Recycever anti-fraud

Silhouette Check: Computer Vision in Action

At the core of this fraud prevention mechanism is computer vision, a technology that enables the RVM to “see” and interpret containers in much the same way a human would. Think of it as asking a person, "Is this a can or a bottle?" and having them answer based on visual clues. Similarly, our AI-powered computer vision system can quickly determine if a returned item is a valid container, and more importantly, whether it has been processed by the compactor.
The system performs a silhouette check, comparing the returned container’s shape and appearance to a set of expected patterns for valid items. This is crucial because it ensures that the RVM can distinguish between a new, unprocessed container and one that has already gone through the machine. Just as a human would recognize a dented can or a slightly misshapen bottle, our computer vision can detect even subtle differences that suggest the container has been compacted.

Recycever anti-fraud

Positive and Negative Learning: AI Empowerment

What sets Recyclever's RVM apart is its ability to learn from both positive and negative examples. Positive learning helps the system recognize and validate containers that meet all the required criteria for a refund. Meanwhile, negative learning enables the system to identify containers that have already been processed, including those that have passed through the compaction stage.
This capability is vital because containers that have undergone compaction are significantly altered. The compactor reduces the volume of the container without breaking it into pieces, ensuring it’s easier to recycle while also making it physically different from its pre-compacted state. For example, PET bottles might be scarred by the compaction process, preventing them from being reinflated, while aluminium cans are compressed into a smaller, denser form. These physical changes are captured by the camera and AI system, which flags any attempt to reprocess a container that has already been compacted.
The Compactor’s Role in Preventing FraudThe compactor’s functionality is integral to the entire fraud prevention system. Not only does it dramatically reduce the volume of the container, but it also leaves distinctive marks that make it unmistakable. For PET bottles, the compaction process scarifies the plastic, making it evident that the container has been previously processed. This makes it impossible for fraudsters to reuse containers for multiple returns, as the physical damage inflicted by the compactor is a clear indicator that the container has already been through the machine.

Recycever anti-fraud

Double-Layered Security

The entire fraud prevention framework is built on a double-layered security system that combines the AI-powered computer vision with the physical compaction process. While the computer vision system automatically detects and validates containers based on their silhouette, shape, and learning patterns, the compactor reinforces this by leaving visible, irreversible marks on containers that have already been processed. Together, these technologies create a highly sophisticated and effective system that guarantees the integrity of every return transaction.
In essence, Recyclever’s RVM combines advanced machine learning, cutting-edge computer vision, and the robust compaction system to create a secure, reliable, and fraud-resistant environment. The result is a powerful solution that not only prevents the reprocessing of containers but also enhances the overall user experience by ensuring that only legitimate, unprocessed containers are refunded.

Recyclever Reverse Vending Machines avoid fraud!

While retail shrinkage and fraud within Deposit Return Schemes (DRS) present significant challenges, innovative technologies, like those used in Recyclever’s Reverse Vending Machines, are helping to combat these issues. By leveraging advanced sensors, computer vision, and robust validation systems, Recyclever ensures that fraudulent activities are detected and prevented, maintaining the integrity of both the recycling process and the financial sustainability of DRS. With continued investment in technology, we can create more secure, efficient, and environmentally responsible systems for the future.