The Real Reasons Your QSR’s Customers Are Committing Friendly Fraud

After reading the news, you may think that the only payment processing risks affecting quick service restaurants are massive data breaches involving anonymous hackers who compromise millions of credit card numbers stored on servers. In the first half of 2019 alone, there were 3,813 data breaches that compromised 4.1 billion files across businesses in different industries. This included food industry heavyweights like DoorDash, resulting in 4.9 million customers and 100,000 drivers losing sensitive data to hackers from a single incident.

There is, however, a more stealth form of theft pervading the restaurant industry: Friendly fraud. In this case, customers request a refund from their credit card company because they legitimately do not recognize an item on their credit card statement even when they made the purchase.

Customers commit friendly fraud for the following reasons:

They honestly forgot they bought something from your QSR

The Fair Credit Billing Act (FCBA) allows for chargebacks based on various examples it defines as billing errors, including charges that have the wrong date or amount, charges for goods a customer did not accept, and charges that require clarification.

Picture a customer from New York who orders a chicken sandwich combo from one of your QSR’s Ohio locations while on a road trip to California, only to dispute the charge months later because they do not remember ordering food in Ohio. The customer could call their credit card company and honestly claim their dispute fits all three criteria above, forcing the credit card company to view it as a legitimate billing error until an investigation proves otherwise.

Someone they trust with their credit card made the purchase

According to one authority on credit cards, companies like American Express allow for minors as young as 15 to become authorized users of an adult’s credit card. If parents are reviewing their credit card statements and seeing unfamiliar purchases, they may dispute the charges before checking with their children first.

Perhaps an elderly person who can no longer drive gave their credit card to their 16-year-old grandson to use at the Taco Bell drive-thru one day in July. They are not your typical customer, and never order tacos for themselves—which only adds to their frustration when they see Taco Bell on their credit card statement in August and conclude they have no recollection of making the purchase.

The name of the purchase on their credit card statement is not what they expect it to be

CreditCards.com mentioned that some Burger King franchises in Frederick, Maryland, appear as “Jeffrey Giangrande Corp” on credit card statements, which can happen when franchisees set up merchant accounts in their own name. Holding companies that own multiple franchises may set up a single merchant account for all of their restaurants, which can confuse customers if they see an unfamiliar location listed on their statement.

To make things even more confusing, some online payment processors use their own name on credit card statements, resulting in a purchase from Thrive Market appearing as “Braintreecharge.com” while the charge is still pending. Braintree, the payment processor, brings up this issue on its website, mentioning that some banks will even include this misleading information once the transaction settles.

Stay tuned for more Payment Processing posts for the month of December, including tips on how QSRs can minimize the financial impact of friendly fraud.

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