Return fraud has become one of the least visible — yet most costly — problems in modern retail. As online shopping continues to grow, so does abuse disguised as legitimate returns, quietly eroding margins. A new startup, Pinch AI, is targeting that blind spot, focusing on fraud that happens after checkout rather than at the point of purchase.
The company has now raised $5 million in seed funding, co-led by Dynamo Ventures and Infinity Ventures, as it looks to scale its technology amid rising return volumes, particularly during peak shopping periods.
Built by Veterans of Internet-Scale Fraud Prevention
Pinch AI was founded by a team with deep experience in managing fraud at some of the world’s largest digital platforms. CEO and co-founder Arthi Rajan Makhija, alongside co-founders Chirag Vaya and Jayan Tharayil, previously worked on fraud and abuse systems at PayPal and Google, where they helped protect billions of dollars in transactions across tens of thousands of merchants.
During that time, the founders spotted a growing gap in retail fraud prevention. While return abuse was becoming more sophisticated and organised, many retailers were still relying on outdated, blunt tools that often alienated loyal customers in the process. Pinch AI was created to address that imbalance.
Targeting Abuse Without Punishing Loyal Customers
Rather than treating every return as a potential threat, Pinch AI analyses post-purchase behaviour to identify patterns that signal abuse. The aim is to reduce fraud while keeping the returns process smooth for genuine customers — a balance that many retailers struggle to achieve.
That approach appears to be delivering results. Retailers using Pinch have seen return rates fall by roughly 8%, while VIP customer retention has increased by 20%. Around 80% of return reviews are now automated, significantly reducing the need for manual intervention.
For apparel brands in particular, the financial impact has been notable. Several customers reported a 10% increase in contribution margin within months of rolling out the platform.
Expanding Beyond Individual Retailers
One of Pinch AI’s early customers is jewellery brand Mejuri, which uses the platform to curb abusive return behaviour while continuing to prioritise high-value shoppers. The result has been improved margins without sacrificing customer experience.
Looking ahead, Pinch AI is aiming to embed its technology more deeply across the e-commerce ecosystem. The company is actively pursuing partnerships with returns management providers, platform developers, logistics companies and consultants, with the goal of integrating smarter return controls directly into existing retail workflows.
A Subtle but Strategic Bet
Pinch AI’s core belief is that retailers don’t need stricter return policies — they need better decision-making at scale. By using data to distinguish abuse from genuine behaviour, the company is positioning itself as a low-friction but increasingly essential layer in modern e-commerce infrastructure.
As return volumes continue to rise, especially during high-traffic shopping seasons, that focus on protecting margins without eroding trust may prove to be its strongest advantage.
thetechtrident.com 