Chownow on How Independent Eateries Can Navigate Pandemic-Related Challenges

DECEMBER 2020 FEATURE STORY (p . 7) ChowNow On How Independent Eateries Can Navigate Pandemic-Related News and Trends Deep Dive Scorecard QSR transactions drop The fraud trends The latest mobile Challenges 11by 9 percent year over 17of 2020 and what 21order-ahead provider year in October due to restaurants can rankings decreased dine-in traffic learn from them TABLE OF CONTENTS What's Inside A look at recent mobile order-ahead developments, including the fraud trends 3 brought about or aggravated by the pandemic and how they could shape QSRs’ security measures in the years to come Feature Story An interview with co-founder and COO Eric Jaffe of online food ordering system 7 ChowNow about the struggles independent restaurants faced in 2020 and the fraud lessons they will take into the future News and Trends The latest mobile order-ahead developments, including how restaurants lost $117 million to social media scams during the first half of 2020 and how QSRs’ 11 transaction volumes declined by 9 percent in October compared to the same month during the previous year Deep Dive An in-depth examination of 2020 fraud trends as well as the lessons QSRs must 17 learn from new fraud schemes as they enter the new year Scoring Methodology 20 Who’s on top and how they got there Top 10 Providers and Scorecard The results are in. See the top scorers and a provider directory that features 77 21 players in the space About Information on PYMNTS.com and Kount ACKNOWLEDGMENT 51 ® The Mobile Order-Ahead Tracker is done in collaboration with Kount, and PYMNTS is grateful for the company’s support and insight. PYMNTS.com retains full editorial control over the following findings, methodology and data analysis. © 2020 PYMNTS.com All Rights Reserved 2 WHAT'S INSIDE The pandemic’s impact on the restaurant indus- use smartphone apps for food delivery, with this try in the United States cannot be overstated. figure rising even higher when accounting for take- The National Restaurant Association estimates out or curbside pickup. This number is likely to that almost 100,000 eateries — roughly one in six grow even after the pandemic subsides, with 53.9 restaurants nationwide — have shuttered either million consumers projected to use such apps by temporarily or permanently due to the health cri- 2023. Such solutions are especially popular among sis and its associated social distancing guidelines, younger generations, with 46 percent of 18- to stay-at-home orders and economic downturn. The 34-year-olds utilizing food ordering apps and 50 restaurant industry lost $165 billion in revenue be- percent of Generation Z consumers saying they will tween March and July and is on track to lose $240 try a new restaurant if curbside pickup is available. billion by the end of the year, and this decline is The growing prevalence of these apps is not a pan- expected to continue until the pandemic finally acea for all of the restaurant industry’s ills, however, abates. as fraud continues to plague the space. Many of The surging popularity of mobile apps is one of the these schemes are simply age-old scams that have few factors keeping the restaurant industry from received digital face-lifts, with some of the most entering an inescapable free fall. Mobile ordering popular tactics including chargeback fraud and solutions have proved to be invaluable to restau- fake online reviews intended to drive down a spe- rants as dine-in traffic essentially grinds to a halt. cific restaurant’s popularity. Schemes called “pizza More than 46.5 million consumers around the U.S. plugs” involve the use of stolen credit cards to sell © 2020 PYMNTS.com All Rights Reserved 3 WHAT'S INSIDE discounted meals to unsuspecting consumers, Fraudsters also commonly leverage botnets to many of whom simply believe they are receiving launch their attacks, as malicious bots can quick- special offers. These scams ultimately leave the ly flood QSRs’ defense mechanisms with fake restaurants they target holding the bag when card- accounts and other scam attempts. A new solution holders notice the fraudulent charges and ask for from fraud prevention developer Kount is designed chargebacks. to aid QSRs in thwarting such attacks, allowing them to use a customizable, rules-based detection Recent promising news of COVID-19 vaccines system to differentiate between bad bots and good may have shown the world that the pandemic will bots. More than 80 percent of eCommerce busi- soon come to an end, but the restaurant indus- nesses have reported losing funds to malicious bot try’s concerns will not cease as abruptly. Eateries networks within the past year, with two-thirds of must make use of what they have learned from businesses claiming losses of $500,000 or more. the pandemic — especially the insights regarding the popularity of mobile order-ahead apps —if they The pandemic’s negative effects on restaurants’ wish to remain prosperous for years to come. revenues should not be underestimated, but mobile order-ahead systems are helping eateries Mobile order-ahead developments stay afloat to some degree. A recent study found around the world that QSRs’ transaction volumes declined by 9 per- Social media fraud is surging in prevalence during cent in October compared to the same month the pandemic. These schemes consist of fraud- during the previous year, largely due to decreased sters falsely advertising offers from restaurants on in-restaurant traffic. Experts say that mobile order- social media, duping victims into paying for them ing is one of the few factors keeping this decline and then absconding with the funds. Social me- from spiraling out of control, however, helping to dia scams cost more than $134 million in 2019 and offset a 62 percent drop in dine-in revenues. a staggering $117 million in the first half of 2020 For more on these stories and other mobile alone, according to the Federal Trade Commission order-ahead developments, read the Tracker’s (FTC). Approximately 94 percent of victims report- News and Trends section (p. 11). ing being scammed on Facebook and Instagram. © 2020 PYMNTS.com All Rights Reserved 4 WHAT'S INSIDE Executive ChowNow on what independent restaurants learned from a challenging 2020 INSIGHT The pandemic devastated the restaurant indus- A recent data breach of a mobile order-ahead app leaked 2.8 million accounts onto the dark web. How can try this year, with both big chains and independent apps protect their users against this and aid them in the eateries facing the triple threat of lockdowns, eco- event a breach does happen? nomic turmoil and a surge in digital fraud. Those “Attacks like these are often the result of account take- that survive the pandemic will likely be stronger for over or a malicious bot attack. Account takeover occurs when a bad actor, bot or botnet gains control of an app it due to the lessons they learned in this challeng- or customer accounts. Once they have access, they can ing time, however. In this month’s Feature Story make unauthorized transactions, drain stored value and (p. 7), PYMNTS spoke with Eric Jaffe, co-founder steal personal information. and COO of online food ordering system ChowNow, Account takeover can have devastating, long-term effects on restaurants. Beyond lost revenue, account about how independent restaurants can improve takeover fraud damages brands and erodes customer their security capabilities and protect their bottom trust. But QSRs can prevent account takeover fraud with lines by avoiding hefty commission fees. a multilayered approach to account protection. Kount Control applies protection, policy customization Deep Dive: How the trends of 2020 can inform and reporting to give restaurants [a] complete [safeguard the coming decade’s fraud-fighting goals against] account takeover. It’s the industry’s first solution that provides an adaptive and customizable way to pro- This calendar year has been devastating for the tect and enhance the entire customer journey. A system country’s restaurants, with eateries facing declines that can protect customer information can help businesses avoid brand and operational damage. Meanwhile, in restaurant traffic as well as surges in fraud. Kount’s Event-Based Bot Detection can stop malicious Criminal tactics on the rise include chargeback bots, allow good bots and quickly analyze, classify and adapt policies to new and questionable bots. fraud, fake reviews and “pizza plug” schemes that involve the use of stolen credit cards. The strate- These days, it’s too easy to lose customers to the com- petition. QSRs and fast casual restaurants new to gies QSRs have developed to fight these types of eCommerce are learning what retailers discovered years fraud could serve the industry well into the future, ago. When bad actors attack, the losses add up quickly. The good news is that enterprise fraud solutions are however. This month’s Deep Dive (p. 17) explores ready to fight fraud in the restaurant space. the fraud trends that shaped 2020 and the technol- Kount’s combination of human expertise and advanced ogies and techniques QSRs are developing to keep AI and machine learning makes it easy to serve up cer- them in check. tainty in every digital interaction. Kount can help QSRs protect and manage the entire customer journey — from account creation and login to checkout.” RICH STUPPY chief customer experience officer at Kount © 2020 PYMNTS.com All Rights Reserved 5 WHAT'S INSIDE Five Fast Facts Detection Breach Kount debuts a new Massive data breach leaks 2.8 botnet-detecting fraud million mobile

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