Why quick-service restaurants have a digital fraud problem

As dining rooms continue to restrict capacity amid responses to the coronavirus, consumer demand for online and mobile ordering has accelerated. To meet the demand, 31% of restaurants said they’ll invest in delivery services or technology, according to a 2020 Reward Networks survey.

And those that plan to adopt online and mobile-ordering can recoup more revenue lost to a decline in dine-in customers through things like up-sell opportunities. On average, online orders are 20% larger than in-restaurant purchases, says a recent ChowNow report.

But more online and mobile orders mean an increase in digital fraud losses, as bad actors respond with new digital attacks. And they’re targeting many points in the customer journey — well beyond the point of payment. For quick-service restaurants (QSRs), solving digital fraud problems means understanding four key elements that contribute to it.

1. They don’t understand what ‘good’ customers look like

It’s key to remember that QSR transactions don’t always look like typical eCommerce transactions. They’re smaller and more frequent. For example, it’s not unusual for a consumer to make several small purchases from a QSR in a day. Those are still “good” customers. Now, compare that to a furniture company or clothing retailer. Several small transactions from one customer in a day may more likely be a bad actor testing credit cards.

To understand “good” transactions, QSRs that use Kount’s AI, which includes both supervised and unsupervised machine learning, can assess the risk of each transaction. Kount’s AI produces the Omniscore, which learns continuously to detect fraud more accurately. This at-a-glance score and the ability to see advanced analytics in one place can help QSRs understand why Kount makes fraud prevention decisions. More data improves fraud detection overall.

2. They’re susceptible to account takeover and loyalty point drain

Customers who use QSR apps often may have a high number of loyalty points. Protecting those points is essential to keeping good customers and maintaining trust. Unfortunately, credential stuffing and account takeover attacks put those points — and revenue — at risk. With credential stuffing, bad actors test thousands of usernames and passwords in quick succession to access user accounts.

Meanwhile, account takeover fraud has emerged as an issue for online businesses and digital commerce. Given that consumers often use the same credentials across multiple sites, bad actors don’t need a lot of data to launch account takeover attacks. Just a password, account number, username, email address, or Social Security number will do. Once an attacker acquires credentials from a website breach or password dump site, they can test them across sites.

Account takeover can have devastating, long-term effects on QSRs. Beyond lost revenue, account takeover fraud damages brands and erodes the trust of good customers. But QSRs can prevent credential stuffing and account takeover fraud with a multilayered approach to account protection. Kount Control applies protection, policy and customization, and reporting to give QSRs complete protection from account takeover. It’s the industry’s first solution that provides an adaptive and customizable way to protect and enhance the entire customer journey.

3. They’re taking too long to make decisions

For QSRs, speed and convenience are essential because consumers have options. If one restaurant’s app or online ordering platform takes too long to approve a transaction, good customers will be less likely to return. Any friction in the buying experience can drive customers to competitors and erode loyalty. But having a fraud detection system that uses AI and machine learning can save QSRs valuable time.

At the end of the day, it’s not realistic for QSRs to review every transaction manually. Having a fraud detection system means that QSRs can approve transactions quickly. And they don’t have to perform manual reviews or delay hungry customers.

4. They’re not detecting card testing

It’s easy to mistake good QSR customers for bad actors conducting card testing. But QSRs are still common targets of this type of fraud. Card testing occurs when bad actors need to validate stolen credit card details. To do this, they may place several small orders on one card or many, at once or within a short time frame. Essentially, they’re weeding out canceled or invalid cards. Once they confirm which credit card numbers are live, they can make larger fraudulent purchases.

Because QSRs can’t manually review every small transaction, Kount does the hard work of knowing the difference. Having the Identity Trust Global NetworkTM means accessing additional data points that indicate fraud activity like card testing. QSRs alone may not know much about a customer’s buying activity. But Kount’s network pulls data from across industries, so QSRs have a more accurate idea of what kinds of behaviors are abnormal for some customers.

QSRs can solve their digital fraud problem by protecting the entire customer journey

These days, it’s too easy to lose customers to the competition. QSRs and fast-casual restaurants moving into the card-not-present space are learning what eCommerce retailers discovered years ago. When bad actors attack, the losses add up quickly. The good news is that enterprise fraud solutions worth their salt are ready to fight fraud in the restaurant space.

Kount’s combination of human expertise and advanced AI and machine learning make it easy to serve up certainty in every digital interaction. Kount can help QSRs protect and manage the entire customer journey — from account creation and login to checkout. Use Kount to the fullest to make accurate decisions in real time to reduce manual reviews up to 83%.

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