Fraud trends part 3: fraud in the food service industry

In this blog series we are exploring the latest fraud related events and issues on the rise in our digitized world. The first installment in the series explored account takeovers (ATO) and the $7 billion yearly loss affecting even the largest organizations. The second installment explored the ways fraudsters are capitalizing on the rise of e-commerce.

In our third post of the series, we will touch on the ways fraudsters are taking advantage of the move to online sales during COVID-19 in the food service industry. The increase in online and in-app orders has opened the door for transaction- and offer-related fraud deeply impacting businesses already hurting from the impact of COVID-19.

Read “Protecting Customers, Revenue, and Reputation from Online Fraud” to learn how AI helps your organization adapt to shifting fraud patterns and protect you against account takeover, lost revenue, and more.

COVID-19 and the impact of fraud in numbers

Fraudsters are strategizing new ways to capitalize on vulnerabilities amplified by the COVID-19 pandemic making fraud detection increasingly important as millions are faced with financial hardships. In September 2020, the Federal Trade Commission reported that in the United States alone, over 205,000 consumers have experienced fraud attacks linked to COVID-19 amounting to over $145 million in fraud losses.

With more virtual transactions than ever before, businesses across the globe are increasingly susceptible to fraud. One industry hit hard is food service.

Types of fraud associated with restaurants

When the pandemic brought on strict new regulations, restaurants and consumers alike were quick to adapt. Between March and April 2020, there was a reported 78 percent increase in card-not-present (CNP) activity. Fraudsters pounced on this opportunity and began placing orders with stolen credit cards, claiming food never arrived, and even creating fake social media posts to deceive customers. These actions not only hurt a restaurant’s bottom line, but also their reputation.

In August 2020, a popular pizza chain, Little Caesar’s, was forced to release a statement that an offer circulating the internet promising free pizza in honor of the chain’s 61st birthday was fake. The offer was posted to a profile masquerading as Little Caesar’s official account and had over 100,000 shares. Stores were forced to turn away angry customers expecting free pizza.

In the United Kingdom, a similar advertisement was making its way into customer’s inboxes, once again claiming free pizza was just a click away. The message claimed to be from Domino’s and prompted users to click on a phishing link and where customers would give their personal information.

The jump in online and over-the-phone orders has skyrocketed CNP transactions. CNP transactions occur when a credit card and its holder are not present for payment, making verification of a valid transaction tricky. While customers may find saving their payment information on profiles for online orders convenient, fraudsters see it as their chance to engage in fraudulent activity.

As the pandemic continues, fraudulent activity cripples many businesses across the world. The food industry’s need for a solution to address fraud is clear. Many business owners have been left wondering what their options are to reduce fraud.

Darden Restaurants addresses fraud with Dynamics 365

Darden Restaurants, operating some of the most recognizable brands in full-service dining including Olive Garden and Longhorn Steakhouse, needed to move swiftly to address a growing fraud issue during the COVID-19 pandemic. With the shift to an online-only model, Darden Restaurants started noticing some fraudulent payments and looked to Microsoft for help. Darden Restaurants deployed Microsoft Dynamics 365 Fraud Protection to combat purchase fraud at LongHorn Steakhouse, and together with Microsoft they had the solution quickly up and running—protecting the restaurants and customers against fraud.

How Microsoft protects the food industry from fraud

Dynamics 365 Fraud Protection helps merchants combat the types of fraud and legacy security systems gaps that are threatening the food service industry.

A cloud-based solution recently awarded the Juniper cybersecurity platinum award, Dynamics 365 Fraud Protection is designed to help e-commerce, brick-and-mortar, and omnichannel merchants protect their revenue and reputation. Deploying adaptive AI technology that continuously learns, Dynamics 365 Fraud Protection defends against purchase, account, and omnichannel return and discount fraud while reducing operational expenses and increasing acceptance rates. It also helps protect user accounts from fraud exposure, helping to retain customers and maintain satisfaction.

Dynamics 365 Fraud Protection offers three capabilities which can be integrated together or used individually, providing merchants the option to use the capability that best suits their business needs:

  1. Account protection helps protect online revenue and reputation, and safeguards user accounts from abuse and fraud by combating fake account creation, account takeover, and fraudulent account access.

In the first trend above, offer fraud, restaurants could utilize the account protection capability to help safeguard accounts. Businesses and merchants with account protection could protect their customers’ data by preventing fraudulent account access. Rather than worry about keeping their customers’ data safe, merchants can focus on seamless customer experiences. With both fraud attacks and cost of fraud to United States merchants rising, there is no better time to add the account protection capability to your toolkit.

  1. Purchase protection helps protect revenue by improving the acceptance rate of e-commerce transactions with insights and tools that help balance revenue opportunity verses fraud loss and checkout friction.

The second trend, transaction fraud, highlights the need for purchase protection. With a higher number of transactions and new online users entering their card information, purchase protection can help keep customers happy while helping mitigate fraud loss.

  1. Loss prevention helps protect revenue by identifying anomalies on returns and discounts arising from omnichannel purchases, enabling store managers and loss prevention officers to quickly investigate potential fraud and take action to mitigate losses.

Restaurants across the world could utilize loss prevention to help analyze merchant data and to identify patterns of anomalies to increase merchants’ visibility into potential fraud on returns and discounts while notifying restaurant managers so action can be taken to prevent losses. It’s time to fight buy online, pick-up in store (BOPIS) fraud with the loss prevention capability.

Learn more

Learn additional information about Dynamics 365 Fraud Protection capabilities including account protection, purchase protection, and loss prevention and check out the e-book, “Protecting Customers, Revenue, and Reputation from Online Fraud.” Learn more about our Microsoft Dynamics 365 Retail offerings.

Questions? Contact your Microsoft sales representative to learn more about Dynamics 365 Fraud Protection capabilities.