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As we enter 2024, many in the restaurant industry continue to feel the ripple effects of the pandemic. While higher food prices, disrupted supply chains, and a labor shortage pose numerous challenges, increased fraud—in-store and online—is eating away at profit margins when they matter most.
Macroeconomic factors are hard to control, but mitigating fraud is one thing restaurant brands can do to help protect their bottom line and grow as a business.
Looking ahead, here are some fraud trends restaurants should be aware of:
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1. Account takeovers are a real concern
Account takeovers (ATO) are a hot topic across industries—and for good reason. In 2022, there was a 71% increase in account takeovers across North America. And in 2023, the food and beverage industry, specifically, saw a 485% lift YoY in ATOs.
These prevalent attacks occur when fraudsters steal a user’s account credentials and gain access to an organization’s network. This type of data breach can be very difficult to detect and can cost a business millions to resolve.
2. Delivery fraud is increasing
As demand for digital ordering and food delivery has surged, so has the volume and level of sophistication of restaurant payment fraud—with no signs of slowing down.
In 2021, for example, there was a 115% increase in attempted payment fraud across the food delivery industry during the holidays alone. Additionally, the monetary value of attempted fraud across food delivery apps and websites increased from $35 to $95.
As a result, 9 out of 10 merchants in the food industry say managing e-commerce fraud is “very” or “extremely” important to their business strategy.
3. Friendly fraud continues to be a problem
Friendly fraud is one of the most common attacks used against merchants, including restaurants. In fact, friendly fraud rates rose 20-30% in 2022 across global markets.
It occurs when a guest receives an order and then files a complaint to get a refund and keep the items. Since a cardholder dispute initiates the chargeback process, restaurants must spend more time manually overseeing and processing chargebacks, wasting valuable time and resources.
To combat friendly fraud, restaurants should proactively save evidence from orders in case there is a contested charge. It’s also important to be aware of your chargeback rate and what fees you pay to your payment processor each time you receive a chargeback.
4. Guests want a secure checkout process
Many consumers are aware of and concerned about the increase in fraud. One survey found 62% of people feel fraud is an inevitable risk of online shopping. Furthermore, 58% are uncomfortable entering financial data online to pay for goods and services.
To ensure guests feel safe ordering online in 2024 and beyond, many restaurant brands will invest in modern payment technology, advanced fraud protection, and a secure, accelerated checkout process—including digital wallet support, the ability to save a card on file, and passwordless login.
5. Fraud protection is improving
Fraud prevention is about striking the right balance between reducing fraud and ensuring guests can order with ease. As fraud schemes become more complex, restaurants will look for new ways to protect their digital business.
Some restaurant payment solutions use machine learning to identify and accept legitimate orders—and intelligently fight against bad actors. Olo Pay, for example, helped WaBa Grill reduce fraud by over 30% and saved Lucille’s Bar-B-Que an estimated $1.1 million by blocking nearly 6K high-risk orders.
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To effectively protect and grow your digital business, talk with your current payment processor about how they are addressing the challenges above. And don’t be afraid to ask the tough questions.
When you’re ready to scale, reach out to our team of payment experts to learn how Olo Pay helps restaurants combat fraud today and prevent future threats.
