The DailyPay Blog

With new technology comes new fraud for the QSR industry

With the rise of new and agile technology in the mobile industry, the potential for and evidence of fraud has also gone up.

There are two types of fraud that specifically have hit the quick service restaurant (QSR) vertical – customer fraud and employee fraud. In this article, we highlight two.

Loyalty apps and mobile ordering options are more than a popular trend. The new form of commerce, dubbed m-commerce, is becoming an integral part of many businesses’ growth strategy — 33% of merchants believe the mobile channel will represent at least half of their total revenue by 2020.

Mobile sales are especially crucial to the QSR vertical. Many customers who frequent QSRs are already accustomed to both apps-based payments (digital wallets) and mobile loyalty programs, which means QSRs without the capability may quickly fall behind the competition.

With every new innovation comes growing pains. We are quickly finding that increased functionality with mobile payment and loyalty program options creates new risks for fraud.

In fact, about 75% of merchants from the food and beverage industry reported that mobile fraud attempts increased in 2017. Unfortunately, 54% of the same merchants said detecting fraud is one of their most significant challenges when it comes to mobile.

Let’s dive into some of the specific examples of mobile fraud.

qsr checkout b&wTypes of Fraud QSRs face

Fraud has evolved from simple schemes like card testing or “friendly” fraud into more complex attacks that monetize every aspect of the digital customer journey.

Account takeover (ATO)

Purchasing someone’s identity can cost as little as $1 on the Dark Web. Fraudsters can easily buy hundreds of account credentials and continue testing them until they gain access to someone’s existing account. Once a fraudster gains access to an account, they are able to take full advantage of its information, including using saved payment methods or loyalty points to make purchases.

ATOs are particularly damaging if customers are duplicating passwords across platforms. If this is the case, fraudsters can make purchases on the breached account, and any other account with similar information like bank accounts or digital wallets.

Friendly fraud

Many QSRs are making ordering functionality via third-party apps or systems a cornerstone of their mobile strategy. Many customers can now place an order ahead of time using voice-activated systems like Apple HomePods or Google’s Alexa. Dunkin Donuts is giving customers the ability to order ahead using the Waze app.

While these order ahead features make consumers’ lives more convenient, they’re also susceptible to ‘friendly-fraud’, i.e. someone other than the customer—a child who can yell ‘Alexa!’ for example—that can accidentally place an order. Many businesses will authorize a refund, which can create losses for the company.

Chargebacks are also classified as “friendly fraud.” In this case, consumers may illegitimately click the “I didn’t order the product” or “the product never arrived” options of an app to receive money back for a product that they did in fact accept. Unfortunately, for user-experience, these options are a necessity for customers who need to use these options legitimately, but as a merchant chargebacks cost upwards of $40 billion annually.

Hackers

Another type of mobile-based fraud occurs when hackers exploit software vulnerabilities (like an error in the code or a flaw in response requests) to gain access to sensitive information stored within apps.

Mobile apps are also at risk of social engineering attacks. Developers with a hacking background can install malware within their applications so that each time an app is used or downloaded, a user’s account information is accessible.

Both of these hacks are difficult for consumers to catch, and businesses may not know how to determine if this is affecting their mobile apps.

mobile paymentEmployee Paycard Fraud

The QSR industry is also vulnerable to employee fraud through a platform meant to make life easier – instant payment programs utilizing pay card technology.

Instant payment programs that utilize pay cards have become a hub for employee fraud in the QSR space. These services that seek to make lives easier ironically add a layer of fraud and frustration for companies that use them.

When instant payment programs utilize pay card technology, each pay card is associated with a specific account identifier that is meant to correspond with the employee that uses that pay card. As such, instant payment platforms that use pay cards enable employees to request money be sent directly to their pay card. Platforms utilizing this technology check whether or not an employee associated with a pay card account identifier has already requested payment, and if they have not, will withdraw the requested amount from the associated account.

Employees can easily defraud this system. Because pay cards operate in connection with account identifiers (and not individual employees themselves), the mechanism to send payments is not directly tied to the individuals requesting payment. As the disbursement of requested payments is tied to a pay card account identifier, fraudsters are essentially able to flit from account identifier to account identifier, taking various requested amounts out each time.

This specifically impacts the employer – the payouts to employees come straight from the company’s coffers. Companies are directly hit by these inefficiencies in pay card technology (and the inability for providers who utilize this technology to do anything about it).

The way pay card technology works necessitates certain safeguards against fraudulent activity – these safeguards don’t exist and don’t seem to be coming anytime soon.

Companies Must Stay Vigilant

The reality is 35% of merchants do not track mobile fraud even though 60% of overall fraud originates from a mobile device. But, mobile payments aren’t going away anytime soon.

As the demand for mobile payment functionality quickly grows, businesses must organize and strengthen their technical support, so their mobile features function efficiently. Companies must stay vigilant to ensure their mobile strategies are secure.

If not executed properly, QSRs — and all industries alike —can face massive monetary loss in addition to customer dissatisfaction and brand damage.

Learn why DailyPay is the most secure and flexible daily payment benefit for QSR employees


More Articles by DailyPay CEO and co-founder, Jason Lee

There are key market forces at play that are changing payroll in 2018. Market Forces Driving Payroll in 2018

 

Today, we are in a once-in-a-generation perfect storm in the payroll industry. Unrelenting market forces—unrelated to payroll—are conspiring to create major change in our industry. The result of this perfect storm is that employees want to control the timing of their pay. And employers will have to meet this demand. READ MORE…

 

DailyPay - why the daily benefit favors transparency and simplicity as a means for reducing employee turnover. Why We Do Things The Way We Do

 

DailyPay’s mission is to give people their first steps toward financial security, and in doing so, to enable companies to reimagine their workforce.  To do that, we have to meet people where they are. Our demographic is asking for a small but important step to give them the feeling of control they lost when they started to get behind on their bills. READ MORE…

What are on-demand payment solutions?

The On-Demand Economy gives rise to on-demand pay. What does that mean?

Uber, Lyft, Doordash—odds are you’ve either used these services or, at the very least, heard of them. Sometimes called the sharing economy, “gig” economy or on-demand economy, the new marketplace for requesting and paying for services has furthered our expectations for instant gratification.

As a byproduct, the gig economy is also changing the way workers get paid for those services. As services are expected to be on-demand, pay is too.

We agree.

With modern technology, employees shouldn’t have to wait weeks to get paid. What are on-demand payment solutions and why are they becoming indispensable?

on demand pay calculatorA Brief History of Payroll

While the development of payroll started as early as the 14th century, the process of actually getting paid in the early days was less than ideal.

Depending on who hired you to do work, it could take weeks, months or even years to receive your pay, and deductions could be taken by employers without cause, meaning workers could be in perpetual debt. There were few laws that governed compensation.

It wasn’t until the 1930s that a formalized payroll process began to take shape and it was nearly a decade after that when tax institutions created regimented pay schedules to help make the process predictable.

In 1957, ADP became one of the first companies to shift from manual to automated payment processing. Automation became even more accessible in the 1980s thanks to the arrival of desktop computers.

While the years that follow mark changes in accessibility and features, the core technology of payroll process hasn’t evolved since its inception, and payment schedules have remained rigid since the 40s. Its long history of stagnancy shows there is little flexibility to pivot when it comes to payroll.
 

Why Traditional Payroll Doesn’t Fit a Modern Workforce

An on-demand economy is fueling the desire for workers to be paid faster. After all, the service they provide is just that: fast and readily accessible. However, the gig economy tends to deal with very frequent but small amounts of money, which makes instant payment via traditional methods fee-intensive and cost-prohibitive.

Precisely why traditional payroll process isn’t a great fit for the on-demand work economy.

Most payroll processors charge a per-employee or per-check fee, in addition to the base account fee. Though the fees vary from one provider to the next, a business owner can expect to pay anywhere from $20 to $100 per month, plus an additional $1.50-$5.00 per payroll run for each employee.

So, a single Uber driver who wants to cash out every day, could cost a business upwards of $35 in payroll fees each week. Multiply that by the millions of drivers who work for Uber, and it becomes a financial crisis.

As a result, 40% of on-demand employees in the US say they get paid within the week, with 41% stating that payout occurs within the month.

The disconnect is obvious.

With an on-demand economy, patrons beckon workers with urgency, “come here now. Perform this service for me now.” Under any other circumstance – manual labor for example – a worker would expect to be compensated immediately after completion of the job. But in the gig economy the worker can’t reap the rewards instantly, they must wait to be paid by traditional payroll schedules.

It’s a mismatch.

The gratification for having completed a job satisfactorily is missing, and it’s causing productivity gaps. In fact, 84% of gig economy workers reported they would do more gig work if they were paid faster.

This segment of workers is growing too large to be ignored, too. Intuit recently reported that the gig economy is now estimated to be about 34% of the workforce and expected to be 43% by the year 2020.

Those outside of the gig economy are also interested in shaking up the payroll process, which makes shifting with the market’s needs imperative for companies to stay relevant.

What Are On-Demand Payments, How do They Work?

In short, on-demand payments mean that employers give their employees faster access to their pay. They’re like Uber for paychecks.

Thanks to modern technology, businesses have the ability to pay their employees daily if they want to. With DailyPay, it is no longer necessary to adjust an existing payroll process, sign on with multiple third-party providers, or connect APIs to offer an on-demand payment solution.

DailyPay is non-disruptive and cost-beneficial for businesses to pursue. Payment is made through the web application and transferred to bank accounts at the click of a button. Options like DailyPay allow users to be paid immediately, or ‘next business day’, which means users have even more control over their personal definition of ‘on-demand’.

Why On-Demand Pay is Becoming Indispensable

The excitement around on-demand pay solutions speaks directly to the importance of financial well-being, which is necessary for all industries, and all types of workers.

A startling 78% of full-time workers live paycheck to paycheck. If an unexpected cost arises, or if bills are off-kilter with a payment schedule, the cost of being poor is painful. Workers in this situation incur, on average, $1,000 per year in late and overdraft fees as they wait to get their next paycheck before paying bills.

An Employee Financial Wellness Survey, conducted by PricewaterhouseCoopers (PwC) explains how widespread financial stress is in today’s world. Responses from 1,600 full-time employees show that:

  • 52% of workers worry about their finances
  • The younger the worker, the more likely he or she experiences worry
  • 64% of millennials said they feel stress about their finances
  • 45% said their finance-related stress had increased over the last 12 months

Not only are these stresses impacting employee mental health, they also translate into workers calling in sick more often, being less productive when they are at work, and filing a higher rate of insurance claims against their employers.

Having access to pay as needed, can spare employees from interest on credit cards, payday loans, and late fees.

In fact, 94% of users self-report that they use DailyPay to pay bills on time and avoid late fees and the frequency of withdrawals tend to be higher at the end of the month when rent and other bills are commonly due. The average transfer from a DailyPay user is only $66.

The flexibility of being paid on-demand payment helps address the root cause of stress and in turn, makes for a happier employee and a more productive workforce.

What are the Results of On-Demand Payments?

According to our proprietary data, employees who access DailyPay:

  • 72.41% feel more in control of finances
  • 66.50% are motivated to work longer hours
  • 67.98% are motivated to work more days
  • 76.85% feel less financial stress

And, employees that use DailyPay work 11% more shifts than non-DailyPay colleagues.

This paradigm shift has incentivized more than just increased productivity too.

  • Absenteeism decreases by 26%
  • Partners filled open positions in half the time (52% faster)

Cost savings realized across industries

High turnover industries like retail and call centers are among the best candidates for an on-demand payment solution because the value of the benefit translates to employee satisfaction and bottom line growth.

For example, one of the largest contact centers in the United States, DialAmerica, uses DailyPay’s on-demand payment solutions to help boost employee retention and recruitment rates.

According to Quality Assurance Training Connection (QATC), a typical center will invest over $6,000 to hire and train each new employee. Lost time and money is only a part of the problem associated with high employee attrition—a tight labor market means that managers are having a harder time finding agents with prior customer service experience or support skills.

DialAmerica signed on with DailyPay to:

  • Increase applicant pool
  • Decrease overall call center attrition
  • Improve employee engagement

DialAmerica estimated that DailyPay’s novel technology provided a seamless three-way solution to recruit, retain, and increase agent engagement. The technology saved DialAmerica more than one million in costs associated with turnover in over a nine-month span.

DailyPay is a Flexible On-Demand Payment Solution

It is no longer necessary to adjust an existing payroll process, sign on with multiple third-party providers, or APIs to reap the benefits on on-demand payment. Apps like DailyPay are non-disruptive and cost-beneficial for businesses to pursue.

REQUEST DEMO

Press Release: DailyPay Announces Partnership with Maxwell Group

Over 2,000 Caregivers to Join the DailyPay Movement

 

NEW YORK (July 24, 2018) – DailyPay, an on-demand pay platform that reduces employee turnover through instant access to income, today announced a national partnership with Maxwell Group— a manager and operator of senior communities—and their 2,000 employees across six states.

Continue reading “Press Release: DailyPay Announces Partnership with Maxwell Group”

Press Release: DailyPay Announces Partnership with Heritage Operations Group

Thousands of healthcare professionals now have access to on-demand payments through DailyPay to ease financial hardships

 

NEW YORK (July 24, 2018) – DailyPay, an on-demand payment platform that reduces employee turnover through instant access to income, today announced a national partnership with Heritage Operations Group and the thousands of dedicated healthcare professionals working at their facilities across Illinois and Indianapolis.

Continue reading “Press Release: DailyPay Announces Partnership with Heritage Operations Group”

SHRM 2018 Recap: Workplace Trends That Are Changing HR

AI, millennials, and mental health – modern workplace trends continue to challenge HR executives

The life of a Human Resources (HR) executive is never dull!

 

In addition to finding the best ways to recruit and retain employees, and reducing absenteeism in the workplace, they also have to stay current on new technology and issues that are top of mind for their employees.

 

That’s why I find the 2018 SHRM Annual Conference & Exposition super valuable.

Continue reading “SHRM 2018 Recap: Workplace Trends That Are Changing HR”

Market forces driving payroll trends in 2018

Parallels Between the Movie Industry and the Payroll Industry

 

An image of an old Blockbuster card. In 2010, Blockbuster failed to respond to market trends being driven by Netflix.In the early 2000s, Blockbuster had several opportunities to acquire a small upstart called Netflix.

 

Secure in its belief that the home movie business would never change, Blockbuster declined every time. In 2011, Blockbuster went bankrupt, and today we can now watch a movie on our phone while waiting in line, thanks to Netflix.

Continue reading “Market forces driving payroll trends in 2018”

Competitive Benefits for a Competitive Job Market

To quote The Atlantic, “we are living in an Age of Peak Perk.”

 

If you want to attract top-tier talent and hold onto them, then offering competitive benefits that support overall happiness and well-being is an absolute must. Happy workers make for more successful companies. According to research, happy employees work 12% harder and take up to 10 times fewer sick days. Continue reading “Competitive Benefits for a Competitive Job Market”