With the rapid rise of food delivery services has come the concurrent rise of food delivery fraud.
In fact, as noted in the October Digital Identity Tracker, a PYMNTS and Jumio collaboration, consumers lost $56 billion to identity fraud last year with stolen credentials for third-party delivery services such as DoorDash, Grubhub, Instacart and Uber Eats. And this is far from the only type of fraud plaguing the on-demand food delivery industry. Friendly fraud, a type of chargeback fraud that is the result of the customer’s own intentions and actions, runs rampant in the sector.
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Bala Kumar, chief product officer at Jumio, a Palo Alto, California, mobile payments and identity verification company, spoke with PYMNTS in an interview about how the right protections can help combat this kind of fraud.
Kumar said friendly fraud is particularly tricky to track down because customers themselves are committing it — often without malicious intent. As an example, he offered that a child may take their parent’s credit card and purchase food for delivery without the knowledge of the cardholder, and the parent reports the order as fraud.
“We’ve seen upwards of 18 to 22% of fraud tied to [the food delivery] sector,” he said. “It’s no joke. It really comes back to what controls we have in place for preventing normal fraud and also for preventing friendly fraud, especially around family fraud, which is a big chunk of it.”
Keeping Fraudsters at Bay
Kumar noted that multi-step authentication checks such as one-time passcodes sent to the cardholder’s mobile device can be enough to resolve most issues. The parent, for instance, could have gotten a text letting them know their card had been used for a purchase. But other cases of friendly fraud can require more than just an SMS with a string of numbers. It can require more in-depth analysis of a given customer’s previous behaviors.
“Separate from that, if that individual himself or herself wants to commit this fraud, it becomes a lot trickier,” said Kumar. “In those instances, looking at velocity patterns, looking at how frequently those transactions are coming through the door may be one way for [a business] to detect that there’s some anomaly patterns going on with that particular individual, that particular transaction.”
The issue is especially pressing, given the rise of digital ordering in the past couple of years. PYMNTS research from the 2021 How We Eat Playbook found that 47% of consumers had ordered food for delivery in the previous month. Moreover, the study found that 43% of those surveyed were ordering delivery online more often than they were prior to March 2020.
Teamwork Makes the Dream Work
The November edition of the Digital Identity Tracker highlights previous PYMNTS data indicating that 44% of firms plan to invest in digital authentication solutions to improve their reputations for digital identity trust.
Yet part of maintaining security is not just implementing the checks. It is eliminating data silos, allowing every system to work in concert to provide a more comprehensive picture of how the consumer behaves.
“Every organization has got multiple sub-business units,” he said, “and when the left hand does not talk to the right hand, they end up in a situation where fraudsters, after negotiating through one area and getting blocked, they will try and attack the other area.”
He added that, by implementing similar checks across all parts of the organization, and by sharing data between these parts, a company can expand its protective capabilities while getting a better picture of the consumer’s behavior. Other parts of the business, like marketing, can benefit, too.
Kumar argues that one way businesses can create this transparency is by reducing the number of (often incompatible) platforms they rely on.
“By leveraging an orchestration platform, customers can deal with one platform, and behind the scenes, we do the heavy lifting for them,” Kumar said. “We are connecting all the dots. We are connecting all the data, so they don’t have to worry about the data silos. And of course, all of this will be available through a single contract, a single pricing term and so on, so it makes their life so much easier.”