How restaurant owners can protect themselves from takeout fake-outs

April 7, 2021 | By Vicki Hyman

When you’re a restaurant owner struggling to keep your doors open and pay your bills, a big order – six 10-ounce filets, a dozen lobster tails, a raft of sushi – can seem like manna from heaven. But, beware: This could be a fraudster at work.

Restaurants found a lifeline during the pandemic in digital – and notably contactless – payments and online ordering and delivery platforms. They’ve kept millions employed and millions more fed. But the sudden shift has not been without speed bumps.

Some experts have identified an increase in fraudulent transactions at restaurants, particularly as there have been fewer in-person interactions. These range from “friendly fraud,” in which a cardholder doesn’t recognize the purchase on their statement and disputes the transaction, to a digital version of “dine and dash,” where  customers falsely dispute orders shortly after receiving them.

But there are several steps – many of which don’t cost extra money – that restaurants owners can take to protect themselves. Here are some tips to help you identify fraud:

  • Red flags include an unusual number of items ordered, especially expensive items, and multiple orders using the same card within a short time. But you should also be mindful of extremely small charges, which may indicate that a fraudster is testing a stolen card to see if it still works before making a large purchase.
  • Orders that include gift cards or gift certificates, which may be resold, are worth keeping an eye on.
  • For pickup orders that raise suspicions, ask the cardholder to share the last four digits of the card they used in the transaction.
  • If you’re using a third-party delivery service and suspect a fraudulent order, immediately flag it to the platform. If you are uneasy about an order that comes through, you can refuse it.
  • Make sure your acquirer has the correct name of your restaurant for billing. If your restaurant appears on a credit card statement under a different or cryptic name – for example, the name of the holding company – it’s possible the cardholder might not recognize the transaction and dispute it, starting a process that could take weeks to resolve.
  • If you haven’t made the switch to an EMV chip reader, now is the time. Chip and contactless cards are far more secure than magnetic stripes. Since 2015, you are liable for a fraudulent charge if you process a chip card with a magnetic swipe instead of dipping the card into the chip reader or tapping it. Handheld chip readers can make curbside pickup more secure and eliminate the need for restaurant workers to key in credit card numbers over the phone.
Vicki Hyman, director, communications, Mastercard