Fighting Back The Rising Tide Of Food Fraud In The Post-Pandemic Period

mobile food ordering

Dining has gone digital. A fact of our new reality that has snapped sharply into focus over the last half year as restaurants of all sizes and descriptions have had to rapidly reset their operations for a world where restaurants were first closed down entirely and, even when they reopened, customers have remained reticent about dining out. In PYMNTS’ latest consumer study on the subject, the data finds 80 percent of consumers who have shifted to digital ordering from restaurant aggregators say they will stick with either all or most of their new ordering habits moving forward, where “shifted digital” means a consumer is doing less in a physical channel and more in a digital channel for the same activity.

“Before March, restaurants provided order and delivery services as something extra, more of a convenience. Now these services are about safety and security, with features like curbside pickup and contactless drop-off, [and they’re now] a basic part of business operations,” Tim Ridgely, head of order and delivery at Paytronix, told PYMNTS. “[Customers] expect to not only get their food when they want it but for that delivery to happen in a safe and healthy manner.”

And while for many restaurants the ability to make a digital shift — to add on things like delivery service, mobile ordering or curbside pickup — has been a saving grace during this otherwise catastrophically awful period, it has also opened up a whole new reservoir of risk as good and trustworthy consumers aren’t the only ones  avidly eying the restaurant industry’s shift to omnichannel service and advanced digitization.

Even in a whole new world of digitization and omnichannel service offerings, the oldest rule of commerce still is in effect: Where consumers go, fraudsters will enthusiastically follow.

“With more consumers making more digital purchases than ever before, fraudsters hope to slip through the cracks in the midst of other priorities. And in the restaurant business, there is little to no time to do any manual review; consumers expect their food sooner rather than later,” Kount Chief Customer Experience Office Rich Stuppy writes for the latest edition of the PYMNTS Mobile Order Ahead Tracker. 

Fraudster In Many Forms 

The rising tide of fraud in the prepared food segment got an unfortunate illustration this week as food delivery Chowbus suffered a data breach, with information on about 4,300 restaurants as well as data for hundreds of thousands of customers slipping out the door. Information included in the breach, according to data breach watchdog Have I Been Pwned, includes names, postal addresses, phone numbers and more than 400,000 email addresses.

The information reportedly went out in an email to customers titled “Chowbus Data.” A second email from Chowbus confirmed the breach noting that some user data had been illegally access and distributed. The company as of yet has offered no word on how the breach occurred, or how many customers were affected.

The good(ish) news is that credit card information seems to have been safe as transactions are processed by Stripe.

“We are confident your credit card information is safe,” Chowbus reportedly said in an email to customers.

And while breaches by professionals tend to capture the lion’s share of the attention in the rapidly digitizing world, for restaurants professional fraudsters are running neck and beck with friendly fraudsters in terms of losses generated.

Friendly fraud is also known as chargeback fraud — when a consumer initiates a chargeback with their card issues claiming they didn’t order said food item, or that they never received it. The recent uptick in friendly fraud food sellers are seeing can be attributed to the substantial rise in mobile order-ahead. Having very little direct interaction with restaurant staff, Mandy Shaw, CEO of Pasadena, California-based artisanal pizza chain Blaze Pizza told PYMNTS, makes it slightly psychologically easier for that customer to intentionally game or abuse the system in an attempt at a free meal. Chargebacks, she noted, were once a little-used, last-resort method for truly unhappy customers, but as digital commerce has increased, so too have chargebacks by the less than wholly honest.

“You have to continually evaluate whether the protections or controls that are in place are being abused, and then you have to innovate new solutions. Combating fraud is not a one-and-done process, as people will find new ways to circumvent the best efforts,” said Shaw.

Staying Ahead Of The Fraudsters 

Kount VP Gary Sevounts noted in a recent conversation with PYMNTS that Shaw’s observation of the market is not wrong — fraudsters are nothing if not a highly-adaptable group of thieves who will vary their tactics exactly as much as they have to each time to keep snapping up ill-gotten gains. Staying ahead of them, he said, is matter of using data to see them clearly enough so that no matter where they are, not matter what channel they attack — what they are is obvious enough that their transactions are blocked.

“The thing we are learning is the importance of data so that we can draw from that set to identify the difference between what is good and what is bad,” he explained. “It’s also very important to have artificial intelligence that relies on not just supervised models, but also unsupervised machine learning that can quickly identify what’s known about behavior and compare it against new patterns that are emerging.”

But, he noted, that separation from the good and the bad requires a scalpel, not a hatchet. Because the goal in fighting fraud isn’t simply to shut down every bad transaction — but to shut down as many fraudulent transactions as possible without cutting into the good ones made by legitimate customers.

Consumers flooded to digital dining because it presented an easy, seamless and delicious alternative to cooking their own food or taking on the risk of eating in-house at a restaurant. Security is an equally critical element to the digital service recipe — but not at the expense of the other three.