- Customers making false refund requests are a big problem for food delivery apps, per a new report.
- Diners often can often get their money back even when nothing is wrong with their order.
- That can lead to losses for the delivery apps.
Asking for a refund on your food delivery — even when there's not anything wrong with it — is a big problem for delivery services, according to a new report.
About 48% of consumer fraud on delivery apps involved "refund fraud," according to a report released Wednesday by Incognia, a fraud-prevention company. Incognia works with gig delivery apps, including Grubhub and Texas-based Favor, and analyzed instances it detected on the apps.
"You can say the food wasn't good, the food was cold, there was something missing," André Ferraz, the CEO and cofounder of Incognia, told Business Insider. "How do you verify these things? It's very difficult."
It's an ongoing issue. Telegram groups and TikTok videos show would-be fraudsters how to request refunds and set up new accounts when the old ones get shut down, CNBC reported last year. Some even use "r3fund" instead of the correct spelling to avoid getting deleted.
On many apps, customers can get their money back on a few orders in a row, Ferraz said. "But if you do that 10 times, then the platform will not allow you to ask for refunds," he said. "You're abusing the platform."
However, some particularly determined fraudsters can obtain multiple emails and phone numbers to open multiple accounts and keep requesting refunds, Ferraz said.
Fraudulent returns cost retailers across the board $103 billion in 2024, a report from fraud prevention company Appriss Retail and Deloitte found.
Some users also use promotions from the apps to make money, Incognia's report found. In some cases that Incognia analyzed, for instance, a single user used multiple email addresses to create new accounts, each of which got a discount on an order for new customers.
That made up the 48% of fraud that Incognia found on food delivery platforms. Often, the scams draw on money that the apps have earmarked for attracting and retaining new customers.
"This method of abuse can drain marketing campaign budgets, increase user acquisition costs, and distort growth metrics," Incognia's report reads.
Some delivery services say that they have ways of detecting these types of fraud.
Uber Eats' website says that the company takes "fraudulent behavior seriously" and it has "filters in place to monitor both customer and delivery person behavior."
"We will not make adjustments on suspicious refunds," the company says.
DoorDash last year started sending a four-digit number to some customers to prevent fraud. The customers are supposed to provide the PIN to the delivery worker when they arrive as a verification that they received the delivery.
While the "vast majority" of customers are honest, "there may be times when a consumer makes a report that turns out to be inaccurate or even more rarely makes a false report," DoorDash said at the time.
Still, keeping up with fraudsters can be difficult, Incognia's Ferraz said, since they often use new tactics and ever-changing contact information.
But there are ways of identifying who is likely making an honest request and whether accounts are legitimate. When someone creates an account on a delivery service, for instance, Incognia looks to see whether their device's location is near the address listed on their driver's license. If it is, that makes it more likely that the applicant is who they say they are, Ferraz said.
"You need to keep up with all the things that fraudsters are creating," he said.
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