For quick-service restaurants (QSRs), offering mobile ordering isn’t just critical to staying competitive, but also for boosting sales. Unfortunately, smaller restaurants with just a handful of locations and smaller budgets can often struggle to provide these services. To top that off, they don’t necessarily have the resources to tackle fraud.
Designing apps and offering mobile ordering takes funding and technical know-how, and accepting online payments means dealing with card-not-present (CNP) fraud, putting restaurants on the hook should the customer claim a transaction was fraudulent. However, Chris Webb, CEO and co-founder of ChowNow, believes third-party ordering providers can be well-positioned to help.
Small restaurants may not have the capacity to fight wrongful chargebacks and could have a limited ability to identify suspicious activities. Owners can only form patterns based on customer data from their own restaurants, without insight into how that customer has previously interacted at other businesses. Since ordering platforms like ChowNow serve a large number of restaurants, they have a bird’s-eye view into transactions and can leverage those insights to help keep customers and restaurants stay safe from fraud.
ChowNow provides ordering channels bearing the restaurants’ brands to about 10,000 businesses across the U.S., including mobile apps, Instagram, Facebook and website ordering. Between 60 percent and 70 percent of its clients are single-location restaurants, while the remainder have up to 30 or 40 locations. ChowNow’s 5 million active consumers and wide range of restaurant clients allow its fraud team to analyze a large number of transactions to detect patterns and better recognize suspicious activity.
For instance, if one consumer is placing orders in three different cities at the same time, that’s an obvious sign of fraud. Machine learning (ML) also helps to identify fraud by rating each transaction based on details, such as how recently the user’s email address was created and whether the credit card has been flagged in a fraud database. Users who are determined to be bad actors are blocked, and if consumers believe they have been wrongfully blocked, they can call the company and dispute it with a representative.
Along with having greater access to data, third-party platforms tend to have more resources that allow them to focus on fighting fraud, such as the time and staff dedicated to analyzing and fighting chargebacks — things a restaurant might lack. Busy restaurant owners are more likely to let low-priced chargebacks slide, even if they’re unjustified.
“It’s on the merchant to prove that a chargeback claim is false, and that requires a lot of time and evidence,” Webb explained. “It comes down to the dollar amount — if it’s a large amount, they’ll probably take the time to fight back. If it’s $15, $20 or $30, my guess is they’ll let it fly and move on.”
Platforms like ChowNow can designate teams to evaluate each chargeback. In some cases, consumers filed chargebacks because they did not recognize the restaurant name, or did not realize that a member of their family used their card to make an order. In an average month, ChowNow processes $40 million in food transactions, about $10,000 to $20,000 of which is fraudulent.
Protecting consumers and restaurants means ensuring that security measures are robust, but quick and convenient enough to not deter consumers. There are a few strategies that can help, Webb said. While accepting credit cards is indispensable, it also helps to accept trusted, popular mobile wallets like Apple Pay or Google Pay. This reduces the number of steps, and speeds up the order process, as consumers don’t have to enter credit card information.
Additionally, many security measures can be conducted without slowing down the payment process and without the consumer being aware. For instance, if ChowNow suspects a restaurant’s website is not secure, the platform will migrate the order onto a secure webpage. When the customer clicks the “order” button, instead of the process continuing on the unsecure website, a new tab will pop up, displaying the same menu and order information, and the purchase will be completed there instead.
These security measures provide restaurants with ordering services that help them build sales, as well as more direct relationships with their customers. Webb believes a shift is starting in the restaurant industry: Restaurants are moving away from engaging with customers through listings on third-party ordering platforms, and are instead offering their own apps. Third-party platforms are raising their commission fees, and restaurants are realizing that consumer loyalty to these platforms doesn’t necessarily extend to the restaurant itself.
Not all platforms that collect customer data pass it on to restaurants, either, which could be another reason why restaurants might want to offer their own apps or work with platforms that will provide those insights.
“With Uber Eats, Postmates and other [platforms], when a customer [uses them to] order, they automatically become a customer of [that platform] — not of that restaurant,” Webb said. “Those platforms can really weaken [a restaurant’s] relationship with its customers. … Restaurants are now seeing the ugly side of that and why they need to regain their customers. … In general, we’re seeing restaurants trying to gain back their customers [from these platforms].”
The mobile ordering space is growing, and restaurants big and small are looking to appeal to busy customers. As more small, local restaurants launch order-ahead services to keep up with large brands and consumer expectations, they will want to do so in ways that promote their brands, net them customer data and, of course, protect against fraud.