Fraud in restaurants has had its fair share of attention. Over the years, restaurants have learned to identify, manage and/or prevent fraudulent purchases; but recently, the hospitality industry as a whole has found itself under attack from a new kind of fraud, Card Not Present (CNP) Fraud. And it’s on the rise.
A card not present transaction takes place when the cardholder is not present or does not physically present their credit card at the time of purchase. As a result, card not present transactions are a major route for credit card fraud because it is difficult for a merchant to verify that the actual cardholder is indeed the one authorizing the purchase.
Once only a problem for online retailers or those that sold over the phone, CNP fraud is becoming a larger issue for restaurants and the hospitality industry as a whole. Why you may ask?
As EMV reduces the risk of Card Present Fraud, fraudsters are forced to shift their efforts to other opportunities for deceit and with little to no authentication methods for online purchases, it’s a logical next target. This is a similar pattern we’ve seen globally as other regions have rolled out EMV.
Most restaurants tab totals, especially in the QSR space fall below the minimum purchase thresholds (typically $25) for authorizations. With low tab values, validation in-store is an issue as well. Where speed of service is key, putting any type of fraud detection in place is either pricey or counter-productive.
Growth in transaction volumes in e- and m-commerce channels is accelerating. More off-premise orders as online orders, mobile app orders and phone orders are increasing and in-restaurant diners are decreasing. Restauranteurs are going beyond the four walls of standard restaurants and exploring delivery, food trucks and off-site catering and in turn, increasing CNP transactions.
