Tags: online | delivery | food | industry

Online Delivery Changing Food Industry but Not Always for Best

Online Delivery Changing Food Industry but Not Always for Best

© Mercedes Maldonado | Dreamstime.com

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Friday, 26 July 2019 10:50 AM Current | Bio | Archive

Online delivery in the food and beverage market is booming. Food delivery apps like DoorDash, Uber Eats, Grubhub and more are all competing for consumers’ attention. That’s not to mention the numerous merchant-branded apps also that enable online ordering.

This activity is driving rapid growth in this sector, and the pace of that growth in food ordering isn’t going to slow down any time soon. In fact, restaurant delivery is projected to grow at more than three times the rate of on-premise sales between now and 2023 (4.2 percent growth for on-premises ordering; 13.1 percent for delivery). The growth rate will be even higher for digital orders, which will see a 22.3 percent increase by 2023. That’s in contrast to a 2.3 percent reduction in the number of offline (phone) orders.

There are several factors at play here. First, there’s the fact that individuals aged 21 to 36 will make up 70 percent of at-home delivery services by 2020. Millennials are naturally more inclined to embrace digital options when available. Then there’s the convenience factor to digital food ordering; online ordering offers an opportunity to save valuable time.

The trend toward digital ordering in the food and beverage industry will continue to accelerate in the next few years. Thirty-seven percent of restaurants currently offer online ordering, with purchases via mobile channels expected to reach $38 billion annually by next year. More merchants will get on board every day, with digital ordering likely to be the norm by 2025.

Increased Fraud Accompanies Increased Traffic

Of course, rapid change within a given industry doesn’t occur in a vacuum. The growth of digital food ordering correlates with a sudden rush of fraud activity, too.

According to the 2019 Fraud Attack Index report from Forter, for instance, merchants in the food and beverage industry saw a 60 percent YoY increase in fraud during 2017, followed by a 79 percent increase in 2018. What’s behind this surge in attacks? The core of the problem is that fraudsters are opportunistic. They look for vulnerabilities in new technologies and platforms they can exploit.

If that’s the case, digital food ordering presents plenty of opportunity for bad actors to carry out their activities. Consider account takeover, known as ATO, for example; this tactic works by fraudsters using partially complete information to access their victims’ accounts. Research firm Javelin noted a shocking 300 percent increase in ATO incidents in just one year.

Card testing (fraudsters submitting a number of small transactions to “test” stolen cardholder information) and gift card fraud are other common problems in food delivery.

Above all, though, one of the hardest threats to manage is consumer behavior.

The food and beverage industry endured a 170 percent increase in policy abuse in 2017. We can trace much of that loss to friendly fraud, a post-transactional threat that relies on customers misusing their right to file a chargeback against suspected fraud or abuse.

Increased Fraud Common in Card-Not-Present Transactions

This isn’t a trend unique to food and beverage merchants. We’re noticing increased fraud activity in just about every vertical in the digital market.

Part of the problem is that card-not-present (CNP) transactions are naturally more susceptible to fraud. When merchants conduct transactions remotely, they do so without many of the benefits available to brick-and-mortar sellers. There’s no EMV chip verification, no way to verify identities in-person, or to employ any other useful in-store security measures. Fraudsters know that; as mentioned before, they operate opportunistically. They seek out digital channels, seeing them as a “path of least resistance” against fraud.

That said, the issue is uniquely acute for restaurants because they operate on a much tighter timetable.

Restaurants have only minutes to conduct and fulfill an order. This creates an unfortunate incentive to overlook or bypass due diligence in fraud detection.

The end result: merchants not only lose money to fraud, they run the risk of exposing customers, too. This could shake consumer confidence in online ordering as a concept, causing untold damage throughout the market.

Stop Fraud Without Increased Friction

So, what can merchants do about increasing fraud in this sector? Is it a choice between accepting fraud as a necessary cost of doing business or staying out of the market entirely? Neither of these seem like great options.

It’s hard to make any concrete proclamations about fraud because it’s such a variable, intangible problem. There’s no “one-size-fits-all” solution. Every business is different, and each calls for a customized, multilayer strategy for fraud mitigation.

When deployed properly, tools like address verification, device fingerprinting and dynamic fraud scoring provide a fairly useful profile of the risk a transaction presents. These tools should then work alongside chargeback management and other risk mitigation practices to provide more comprehensive pre- and post-transactional protection. This way, it’s entirely possible to stop fraud without creating more friction.

Digital payments are well-on their way to becoming not just a facet of the food and beverage market, but a primary channel. Fraud and other risk factors will become more problematic as this process develops. It will pay dividends to be proactive and act now to mitigate these new and developing threats.

Monica Eaton-Cardone is an entrepreneur and business leader with expertise in technology, e-Commerce, risk relativity and payment-processing solutions. She is COO of Chargebacks911 and CIO of its parent company Global Risk Technologies.

© 2019 Newsmax Finance. All rights reserved.

   
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Digital payments are well-on their way to becoming not just a facet of the food and beverage market, but a primary channel.
online, delivery, food, industry
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2019-50-26
Friday, 26 July 2019 10:50 AM
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