Over the past few years, food delivery companies such as DoorDash and Uber Eats have transformed the restaurant industry and, as a result, have seen immense growth. DoorDash's market share has doubled in the past four years alone, and recent data shows that these two companies control 96 percent of the U.S. market for on-demand food delivery.
A Market Disruptor
While the pandemic was the initial cause for a surge in demand for food delivery services, this trend has maintained its momentum because a new consumer habit was created—the reliance on doorstep delivery for meals. This has permeated into other consumer habits as well—groceries, alcohol, and medicine are now delivered upon request, sometimes within minutes.
Fraud and Multi-Accounting for Promotion Abuse
Despite its growth, the food delivery market is not without its vulnerabilities. Customers today expect a seamless experience; a big part of this is the expectation that the transaction will be safe and secure. However, the execution of these tactics is not always straightforward. Food delivery platforms are complex business models—for starters, they have many stakeholders—including couriers and end consumers.
For businesses like DoorDash and Uber Eats, driver verification, fraud, and scamming prevention are critical to providing a positive user experience while maintaining their brand reputation. It’s not enough to deliver the food on time and in good condition. One of the most significant issues faced by food delivery platforms is promotion abuse.
One common tactic used by bad actors is creating multiple accounts to exploit the marketing campaigns aimed at attracting new customers. They bypass identification measures, like device recognition, to repeatedly create new accounts to access discounts or free services. Companies are eager to use promotional codes, seasonal promotions, referral discounts, and loyalty programs to expand their clientele base. Still, fraudsters take advantage of this generosity by creating multiple impersonated accounts. By doing so, these malicious actors can exploit the benefits of these programs, such as gaining points or acquiring free services and goods.
Fraud leads these actors to either consume services and products entirely for themselves or acquire them at an advantageous discount to resell at a profit. While promotion abuse is a scam more commonly executed by consumers, the same technique is also used by drivers looking to capitalize on referrals and other incentive programs.
Multi-accounting is not just limited to taking advantage of promotional offers. It can be used to scale existing fraud operations as well. By combining it with techniques like app cloning and device farming, organized fraudsters can cause significant losses to companies.
To make matters worse, weak device identification solutions make tracking fraudulent behavior across devices difficult. Fraudsters often reset their devices and start the same scam all over again if they are banned for policy abuse. This leads to a vicious cycle of detection and blocking that fails to solve the problem.
Apart from promotional abuse, there are other scams that can be accomplished through multi-accounting. For instance, courier drivers who run multiple accounts on food delivery platforms have an unfair advantage over others while claiming preferred rides. This leads to delayed deliveries, poor customer experience, damage to the platform's brand reputation, and increased chargebacks.
Considering the consequences of multi-accounting, companies must have a reliable way to dig into the scope of the problem.
An Innovative Fraud Prevention Solution
In order for food delivery companies to continue growing, they need to ensure that scams and fraud are not undoing customer acquisition efforts. As device recognition capabilities continue to degrade, new fraud signals are emerging to fill the gap. Platforms looking to solve their promotion abuse problem should assess solutions that take an innovative approach to device fingerprinting by including advanced location analysis. This added layer ensures that bad actors are detected even if device tampering techniques are used to avoid recognition. With this in place, security increases, and scams are detected before the damage is done.
With a location identity-based fraud prevention solution, the platform can identify cases of multi-accounting and prevent coupon abuse by cross-referencing the location data of the account being used. The solution can also identify policy abuses such as location spoofing, impacting the end customer experience, and delaying orders.
There are other relevant use cases that can be solved with a layered approach and location precision. By flagging the location of repeat offenders, it is possible to proactively block any future activity coming from those areas with precision.
To combat fraud in the food delivery space, detecting perpetrators and understanding the extent of the issue is crucial. Thankfully, layered and innovative approaches like location intelligence provide a powerful solution for both detection and prevention.
While food delivery companies have seen immense growth and transformed the dining experience for customers over the past few years, leading companies in the space, like DoorDash and Uber Eats, still face challenges that threaten their market position. Adopting a cutting-edge fraud solution will help them safeguard future growth.
André Ferraz is the CEO and co-founder of Incognia, a location identity company with teams in the U.S. and Brazil that provides spoof-proof location verification for trust & safety to verify and authenticate customers throughout their digital journey. André is an expert on location technology and a strong advocate for user privacy. Originally from Brazil, André founded his first company while a university student in computer science and has Endeavor Entrepreneur and Forbes Under 30 Brazil badges. Today the location technology developed by André and his co-founders has been deployed on over 200M smartphones in over 25 countries.
Incognia is an innovator in location identity solutions that deliver cutting-edge user verification and account security across the digital journey. Leveraging over a decade of expertise in location technology, Incognia's novel approach provides frictionless experiences using device intelligence and the most precise location data available. Incognia enables customizable risk analysis and actionable insights from day one that empower consumer businesses to prevent fraud, protect users and build customer trust.