Most common types of food delivery fraud
Fraud in the food delivery industry comes in many forms, targeting both users and delivery drivers. Here are some of the most common types:
Fake Accounts & Multi-Accounting
Fake accounts and multi-accounting are major issues for this industry and can be used to:
- Exploit discounts and incentives offered by food delivery apps: Fraudsters create multiple fake accounts to exploit promotional offers and discounts meant for genuine users. By using these fake accounts, they can repeatedly take advantage of first-time user discounts, referral bonuses, and other promotional deals, leading to significant financial losses for the platform.
- Evade bans: Using fake accounts allows fraudsters to evade detection and continue their fraudulent activities even if some accounts are caught and banned. They can simply create new fake accounts to replace the ones that are shut down.
Now that we know fake accounts are a gateway for fraudsters to conduct fraud on your food delivery app, let’s dive into the types of fraud on the delivery driver’s side and the user’s side:
Delivery Drivers Side Fraud
Account sharing
Driver account sharing includes scenarios where a driver creates multiple accounts using different names, uses someone else's information or ID to establish an account, or shares their login credentials with other drivers. This behavior exposes both customers and the platform to considerable risks, as the app encounters:
Loss of control over who delivers: When delivery drivers share accounts, the app loses control over who is actually making the deliveries. This lack of oversight means that individuals who have not been properly vetted or background checked might be interacting with customers, posing a safety risk.
Inaccurate Accountability: With multiple individuals using a single account, it becomes challenging to hold specific drivers accountable for any issues or misconduct. This lack of accountability can lead to more frequent breaches of trust and reliability.
Reputation Damage: Negative experiences resulting from account sharing can lead to poor customer reviews and a tarnished reputation for the delivery platform. This can ultimately affect customer retention and brand loyalty.
Location Spoofing
Location spoofing in food delivery fraud typically involves manipulating the GPS coordinates reported by the driver's device to the food delivery app. Here’s how it works:
- Drivers use GPS spoofers to appear in a different location than their actual location. This allows them to:
- Appear closer to restaurants or customers, making them seem more efficient and potentially grabbing more deliveries.
- Qualify for deliveries with higher payouts based on distance traveled (reported, not actual).
- Deceptive drivers might spoof their location to falsely indicate a completed delivery, even if they haven't reached the customer. This causes:
- The food delivery app registered the delivery as complete, allowing drivers to collect payment or incentives without fulfilling the order.
- Users having a negative experience, paying for orders they did not receive, which leads to frustration.
Promo/Incentive Abuse
Food delivery apps usually offer rewards and incentives for drivers to encourage them to join and remain active on their platforms. Here are some examples:
Sign-up Bonuses: New drivers may receive a bonus for signing up and completing a certain number of deliveries within a specified timeframe.
Peak Hour Bonuses: Higher pay rates or bonuses for completing deliveries during peak hours or in high-demand areas.
Completion Bonuses: Additional earnings for completing a certain number of deliveries within a set period, such as a day, week, or month.
Bad actors could exploit these bonuses by using malicious tools such as app cloners and emulators to generate thousands of fake accounts from a single device, combined with location spoofing to simulate completing more deliveries than they actually did. Fraudsters then use these fake accounts to claim incentives multiple times.
Automated Order Acceptance
Bad actors can use auto clickers to automatically accept delivery orders as soon as they become available on the platform. This rapid acceptance ensures that fraudulent drivers can monopolize available orders, leaving legitimate drivers with fewer opportunities to accept deliveries.
Ghost Orders
Fraudsters can also create fake or ghost orders that appear to be legitimate deliveries but are never actually completed. This practice can artificially inflate a driver's delivery completion rate or earnings without providing the actual service. Here’s how they do it:
- Cloning Apps: Bad actors clone instances of food delivery apps.
- Creating Fake Accounts: They create thousands of fake accounts and control both driver and user accounts on the same device.
- Accepting Orders: Using tools like autoclickers, they accept numerous orders.
- Simulating Delivery: Using GPS spoofers, they mark orders as delivered without actually completing them.
- Claiming Incentives: Finally, fraudsters claim incentives based on these fake orders.
Users Side Fraud
Account Takeover
In account takeover fraud, a fraudster illicitly accesses a user’s account on a food delivery app. Once inside, the fraudster can order food for personal use and bill the victim’s credit card, or charge a fee to others interested in exploiting the compromised account for the same purpose.
Promo Abuse
Online delivery companies often offer seasonal, event, and one-time promotions. For instance, they might offer '$10 off for the first purchase'. Fraudsters can exploit this by creating numerous fake accounts and using the same promotion multiple times, leading to promo abuse fraud.
Friendly Fraud
Friendly fraud occurs when a customer places an order using their own account, receives the food, and then requests a refund or initiates a chargeback. While legitimate reasons may include extended wait times, incorrect orders, or poor service, some customers exploit this system to dine for free.
Food delivery fraud prevention: why it’s important
The cost of food delivery fraud can vary significantly depending on the scale and nature of fraudulent activities, as well as the specific measures taken by platforms to mitigate and resolve fraud incidents.
Taking a proactive stance and deploying real-time fraud detection & prevention software and risk analysis are essential steps to:
Protect Customers: Fraudulent activities such as account takeover fraud can compromise customers' personal and financial information. Preventing fraud helps maintain trust and confidence in food delivery platforms.
Preserve Reputation: Fraud incidents can damage the reputation of food delivery apps and restaurants. Customers are less likely to use services that are associated with fraudulent activities, leading to potential loss of business and negative publicity.
Prevent Financial Loss: Fraudulent activities can result in significant financial losses for both food delivery platforms and restaurants. These losses may include chargeback fees and refunds for fraudulent transactions.
Maintain Fairness: Fraudulent practices, such as exploiting promotions or incentives, can create unfair advantages for dishonest individuals over legitimate users and drivers. Preventing fraud helps ensure fairness and equity within the food delivery ecosystem.
Compliance and Legal Obligations: Food delivery platforms must comply with regulatory requirements and industry standards related to data protection and fraud prevention. Failing to prevent fraud can lead to legal consequences and regulatory scrutiny.
Operational Efficiency: Dealing with fraud consumes resources, including time and manpower, that could be better allocated to improving service quality and customer experience. Preventing fraud enhances operational efficiency and reduces overhead costs associated with fraud mitigation efforts.
Detecting and preventing food delivery fraud with SHIELD
Fraud starts with fake accounts and multi-accounting from a single device. That's why it's so important to eliminate it at its root before it causes any damage to the business. SHIELD’s device-first risk AI platform sharpens your fraud defense with accurate device identification and real-time risk signals, while enhancing customer experience. SHIELD’s technology consists of two parts:
SHIELD Device ID: the global standard for device identification supports food delivery apps in identifying the fraudulent devices used to create fake accounts or multi-accounting. This helps food delivery businesses like yours detect fraud with unparalleled precision, from casual abusers to the largest fraud rings.
SHIELD Risk Intelligence: exposes devices running malicious tools and techniques, such as app cloners, GPS spoofers, and autoclickers. It identifies the exact moment users engage in fraudulent activities, allowing food delivery platforms to promptly intervene and respond to fraud in real time, reducing potential damage.
