How QSRs Can Fight Friendly Fraud (And Win)

Over the last several decades, issuers and card networks have worked hard to educate consumers on a single point: If a fraudster steals their card number (or physical card) and goes on a spending spree, they as customers will not take the financial hit. All they have to do is call their issuer, report a charge on their billing statement that wasn’t theirs, and their bank will more likely than not instantly refund the money to the card and formally begin an investigation.

And the investigation, Kount Chief Customer Experience Officer Rich Stuppy told PYMNTS, is almost always going to end with a chargeback to the merchant.

That is more or less as it should be. If customers believed that anytime their card was used as a tool by a criminal to finance some fancy electronics — they wouldn’t use cards. Cash may be limiting, but a thief can’t possibly steal more of it than a customer has on them — whereas with a card with a big enough line of credit, there could be life savings-draining damage in a few swipes, dips or taps.

The problem, Stuppy explained, is that criminal fraud — hackers swiping card numbers and the like — isn’t the only type of fraud that merchants face. There is also friendly fraud — when a customer calls in and reports a transaction as fraudulent when it isn’t, and they are actually the person responsible for the charge.

Sometimes that friendly fraud is the result of a simple mistake on the consumer’s part — the way the charge shows up on their bill reads oddly so the customer doesn’t recognize what it is and reports it.

Sometimes the customer is correct in identifying they aren’t the person who made the charge, not realizing that it came from someone in their household; as in the case of the kid who borrows mom’s card to make some Fortnite investments.

But sometimes the fraud is not the result of a sincere mistake, but of consumer training gone a bit awry.

“More and more, consumers have been trained if they want something for free, they can call the bank and know that the bank’s ideal customer experience is to take the dispute at face value and file it as such, at which point it is almost certain to become a chargeback to the merchant,” he said.

And as merchants have gotten more effective at catching and repelling criminal fraud, he noted, they are seeing the balance of the fraudulent chargebacks they’re being hit by coming from “friendly” sources. It is a problem, he said, that has hit quick-service restaurants (QSRs) particularly hard as of late — and the balance of cases aren’t consumers who are mistaken; they are people looking to get a free lunch, literally.

Friday Night Fraud Parties

Friendly fraud schemes in the QSR space, Stuppy noted, have a curious tendency to be contagious in a way they aren’t in other places. A friendly fraud tactic appears one day, and then seems to spread virally within a local area. And basically, he said, the idea is to use the contours of the chargeback system to buy a group of individuals a few free meals.

“Imagine on Friday we are having a house party, so someone buys the pizza for the gang, and then later calls up and charges back the order,” Stuppy said. “The next Friday night comes, and it is another guest’s turn to call in the order — and then charge it back a few days later. This can persist for weeks.”

He noted that pizza is an easy go-to example, but some variation on these eat-for-free schemes can be made to work whenever food is ordered along digital channels.

And while the merchant handing out food for free that they should be getting paid for is the most directly hurt in this equation, the issuing banks are also being hit with cost. They have to process and route all these chargebacks — which adds to their operational costs.

Plus, Stuppy noted, this is a growing form of fraud. People are increasingly able to convince themselves that participating in these large-scale free food schemes is somehow not theft — and the numbers of attempts and clusters of friendly frauds they are seeing is on the increase.

“Merchants that don’t have sophisticated anti-fraud systems will start out with something like 50 percent criminal fraud, 40 percent friendly fraud and about 10 percent that is an error or a problem in their system,” he said. “Once they put in a more sophisticated system, the pie gets smaller, the criminal fraud goes down, and the proportion of friendly fraud shoots up. It can be 60 percent to 80 percent of the frauds are now friendly.”

None of this, he said, is great news. But, the friendly fraud story for QSRs and merchants trying to fight this battle isn’t entirely negative either. Awareness of the problem is increasing, as are the techniques and tools for pushing back on it.

Changing the Perception

The customer who calls in a fake chargeback probably would be unlikely to rob a pizza parlor or attempt to steal a pizza out of the oven. They are also probably unlikely to attempt to shoplift in a physical store. Why so much moral flexibility? Said simply, according to Stuppy, it’s really both very easy and consequence-free to attempt friendly fraud. More likely than not they are going to succeed at netting an ill-gotten gain, and even if they don’t, nothing bad will happen to them.

Consumers don’t steal in stores because they’ve been trained to believe that cameras on the ceiling and staff people are watching them. They know that trying and failing to steal in real-world transactions can land you in jail — and that their behavior is, in fact, being watched.

Consumers likely need similar expectations in the digital world and when dealing with things like chargebacks.

But merchants can start changing those expectations. They can track consumer behavior patterns, spot the outbreaks of chargeback fraud, and cut them off by directly addressing the groups perpetrating it. There are also improved tools, like Kount’s recently released Friendly Fraud Solution featuring Visa Merchant Purchase Inquiry (VMPI) that provides data in real time about the transaction to the issuing bank, Stuppy explains.

“That means the issuing bank can push back when a customer calls in by verifying the information, such as it came from this account number, this address, etc. — are you sure it isn’t yours?”

Just that little bit of friction can really cause people who have been trained to think they can get it for free to immediately stop — and decide they might want to be honest and pay for their pizza. Or, it can help jog the memory of someone who may have simply forgotten the order or misread the billing descriptor.

Friendly fraudsters usually aren’t career criminals. Sometimes they are merely mistaken, and even when they are trying to get away with something, Stuppy said, it often doesn’t take much to deter them from that course. Merchants and issuers, he said, just have to be willing to add in a little bit of fruitful friction to fight friendly fraud.

NEW DATA: Bridging Mobile Banking Apps’ Consumer Authentication Control Gap

NEW DATA: Bridging Mobile Banking Apps’ Consumer Authentication Control Gap

Consumers have come to expect specific services and features from their banks. New research conducted by PYMNTS, however, reveals that banks and other financial institutions (FIs) appear to be lagging in terms of meeting these expectations. Specifically, banks are failing to enabHow QSRs Can Fight Friendly Fraud (And Win) 1le the authentication controls that consumers want in their mobile banking apps.

PYMNTS’ research indicates that nine out of 10 U.S. consumers want to be able to set their own authentication requirements when they access their bank accounts using digital channels. Only five out of 10 consumers have access to banking apps that provide this option, though. In other words, consumers want greater control over their financial apps’ authentication requirements, and they aren’t getting it.

To examine how FIs can bridge this gap, PYMNTS surveyed 2,835 U.S. consumers on their mobile banking app usage patterns. The findings presented in the Consumer-Centric Authentication Playbook: In Search OfHow QSRs Can Fight Friendly Fraud (And Win) 2 Authentication Controls edition, a collaboration with Entersekt, offer actionable insights on providing the right mix of authentication controls that are key to attracting new banking customers, retaining existing ones and boosting satisfaction overall.

The Playbook highlights an interesting finding for FIs to consider: Providing greater authentication controls will not necessarily placate the consumers who want them. In fact, 80.8 percent of frequent users with full authentication controls, and 79.9 percent of those without full control, want to add authentication checks for more transactions, such as mobile check deposits. The Playbook also includes a Deep Dive that explores how attitudes on mobile app authentication controls vary by different generational groups.

Among the key findings presented in the Playbook:How QSRs Can Fight Friendly Fraud (And Win) 3

  • 89.1 percent of respondents who use banking apps want to be able to set additional login requirements
  • 65.5 percent of respondents said they want to be able to authenticate account-to-account transfers
  • 70.2 percent of respondents want authentication controls for added security
  • Only 39.9 percent of respondents use apps that enable them to utilize authentication requirements for specific transaction types

For the latest insights on consumers’ mobile banking app authentication demands, and the steps FIs can take, download the Playbook.

About The Playbook 

The new Consumer-Centric Authentication Playbook: In Search Of Authentication Controls, a collaboration between PYMNTS and Entersekt, is based on a survey of 2,835 U.S. consumers regarding their mobile banking app usage and expectations. The Playbook includes over 300 data points that highlight what consumers want from their mobile banking app experiences, including authentication for specific transactions and heightened security features.

Macrocilix maia, a moth that evolved to look like flies eating glistening bird shit

Macrocilix maia is a moth with a most unusual camouflage: it looks like two flies enjoying a delicious supper of fresh bird shit. Is this merely some amusing human poop-pareidolia, or did Macrocilix truly evolve an appearance that made avian predators think it was a poisoned meal? There is “scant research,” writes research scientist Alex Wild.

The scant published research on the mural moth is systematic in nature, with nary a mention of the incredible mimicry. In fact, the photo-sharing site Flickr has outpaced any academic work: photographer Allan Lee reports in 2009 that the moth reinforces the imagery with a pungent odor. That’s the extent of our knowledge. Macrocilix maia is a Ph.D. project waiting to happen.

Wild was writing in 2011. Has anything interesting been learned of Macrocilix since? Google Scholar suggests only fleeting references in papers and a book, saying nothing more than Wild’s summary. There are many splendid specimens on Flickr, all with nearly-identical caco-camo.

Photo: Alexey Yakovlev/Wikimedia Commons (CC BY 3.0)

Why Small And Innovative Can Win The Retail Race

It’s easy enough to think of small businesses as not being particularly innovative – and even to find data to back up that claim. According to the May 2019 edition of the PYMNTS Retail Innovation Readiness Index, when it comes to adopting digital tools like smart POS or storing customer payment info or accepting digital wallets or adding kiosks to their locations, small firms notably trail their larger counterparts at the enterprise level in terms of how much (both in dollar amount and share of revenue) they are investing in building multichannel operations. In fact, on the zero to 100 scale offered by the Readiness Index, small businesses underscore large firms in terms of digital innovation adoption by over 20 points.

It might be easy to glance at the SMB gap and conclude the issue is a simple lack of interest in being innovative, through a closer read on the data turns up a somewhat different conclusion. SMBs have both less capital and less room for error when it comes to a proposed upgrade not living up to its billing. Moreover, most don’t have dedicated IT teams that can be entrusted with the task of building or integrating the latest and greatest in innovative progress. It is not surprising that when picking a POS vendor, the vast majority of SMBs (67 percent) will choose reasonable pricing as their top consideration as opposed to degree of innovation.

And yet, as Bulletin Co-founder and CEO Alana Branston noted in an interview with PYMNTS, while smaller retailers have all of the limitations listed above, they also have an advantage over their larger, enterprise-level counterparts: They tend to be quite a bit more spry and wired to move more quickly, which can be a powerful drive to innovative approaches.

“I think it comes down to how a firm is run and what problems they are trying to solve for,” she noted. “They can often be ready to move in with really unique approaches and concepts and are able to maneuver their teams very quickly toward new ideas.”

Those are the types of retailers that Bulletin, a retail tech firm looking to disrupt brick-and-mortar retail, wants to work with – because they are the brands that are most interested in offering the types of highly curated physical experiences that Branston’s company specializes in building.

Assortment as a Service

In its early days, Bulletin was often called the WeWork of retail – and though that particular reference point carries some issues as of 2019, the basic conceptual comparison still holds.

Bulletin was founded in 2015 to give retailers a way to get a toe into the world of brick-and-mortar retail without having to take on the expense or hassle of opening up their own shop, while still getting something a bit more permanent and substantive than the dime-a-dozen pop-up shops that have dotted urban landscapes for the last few years.

In short, Bulletin takes a physical location and divides it into sections of various sizes and layouts. Next, they offer brands access to that shelf and floor space on a month-by-month rental plan. Brands use the shops in different ways: Some are looking for short-term engagements to launch new products or test-drive new concepts, while others are looking to build a more permanently tethered relationship with real-world commerce.

A relationship that, importantly, takes them out of the day-in, day-out minutiae of running a retail store – because Bulletin does that part. They take care of running the store, keeping it clear and managing the staff – though individual brands can train Bulletin’s salespeople if they so choose.

“What customers are looking for is a unique and unexpected experience. That is what separates fun shopping from just going down to the store to make a utility purchase,” said Branston, noting that the future of brick-and-mortar stores will rise and fall on their ability to deliver those experiences.

Which is why last year, Bulletin began building a marketplace that matches modern, relevant brands looking for shelf space with retail buyers looking to source new product for their stores.

Offering Assortment-as-a-Service

If one looks around at much of the brick-and-mortar retail experience as it exists today, Branston noted, a single word will probably come to mind: antiquated.

“There is so much about traditional brick-and-mortar that is just trapped in the past. We are centered on how to find a new, innovative way to handle this type of business that is just so antiquated in so many ways – as in lugging inventory to trade shows or sending paper invoices,” Branston noted.

Ultimately, Bulletin aims to kill all of that off, she said. The company has just closed a $7 million funding round, enabling them to build out their wholesale platform. Instead of going to trade shows and wandering from booth to booth hoping something interesting stands out, Bulletin wants to offer its retailers what it calls assortment-as-a-service tools, which leverage a host of data streams to point them toward the types of inventory they ought to be buying. To make those matchmaking connections between retailers and up-and-coming brands, noted Branston, the store uses factors like historical sales data, social media data and current bestsellers, run through their proprietary artificial intelligence (AI).

In some ways, it was a move that stemmed from too much success – with a waiting list 3,000 brands deep, Branston realized they couldn’t solve the digital brand’s transition into brick-and-mortar retail because they couldn’t build enough shelf space to do it in a profitable way. But, she noted, there are plenty of retailers – particularly smaller up-and-comers that are very interested in being on the cutting edge – who have shelf space. They just need insights into how best to fill it – insights that Bulletin thinks it can offer.

Because, Branston noted, brick-and-mortar is a changing environment, and consumers will come to a store if it promises something special to see. Other than that, she said, they will likely decamp to Amazon.

“Shoppers want a human touch from a retailer, but just getting them into a store isn’t providing it,” she said. “Surprising and delighting the customer is what does it – and we think we can better match up brands and customers to make that happen more often.”

IoT Edge Leader Octonion Appoints Former Microsoft and IBM Executive Vianney Airaud “Chief Revenue Officer”

Paris, France — (ReleaseWire) — 11/14/2019 — Octonion, the leader in edge computing IoT platforms whose mission is to bring intelligence to industrial products, announces the hire of Vianney Airaud as Chief Revenue Officer.

Read the full press release at

CBI President calls for greater devolution, better connectivity and Northern Powerhouse Rail for future growth

North west businesses need greater devolution, better connectivity and Northern Powerhouse Rail to unlock future growth. That was the message from CBI President John Allan when he addressed more than 300 people at the CBI’s annual north west dinner held at the Lowry Hotel in Salford last night. Speaking to the packed out room, Mr Allen said: “First, we must continue to unlock regional growth through greater devolution ensuring local people are involved in the decisions that impact them. “In Greater Manchester and the Liverpool City Region, we’ve seen the benefit of having Metro Mayors — who can hold the

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Women should be able to see male colleagues’ pay, says charity

Image copyright Getty Images Women should have the right to know what their male colleagues are being paid if they suspect pay discrimination, a gender equality charity has said. The Fawcett Society is calling for a change in the law to try to cut down on instances of unequal pay. But men can help by simply telling female colleagues what they earn, the charity added. The call comes as Labour pledges to close the gender pay gap by 2030. Fawcett Society chief executive Sam Smethers said: “Pay secrecy means women cannot know if they are being paid equally and fairly.

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