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You may have heard about elder financial exploitation, but did you know that it can affect your business? Kount data has uncovered patterns that suggest businesses can unknowingly be conduits of this activity. Yikes. Fortunately, there is a way to detect and stop it.
What is Elder Financial Exploitation?Elder financial exploitation is a form of elder abuse that involves the use of undue influence to gain control of an older person’s debit and credit cards, benefits, resources, belongings, or assets.
Criminals — and sometimes family members — target older adults because they may be socially isolated or not tech savvy, which makes it easier to scam or control them. Criminals may even illegally obtain a power of attorney to act on the elder person’s behalf.
But how do criminals use your business to commit elder financial abuse? They use social engineering tactics, like scams and threats, to convince elders to make purchases they wouldn’t normally make.
For example, a criminal calls an elderly person and says a family member is in jail. The only way to get that family member out of jail is to send money in the form of gift cards or digital currency. So the elderly person buys gift cards worth thousands of dollars from your business and transfers the activation codes to the scammer.
How Elder Financial Exploitation Negatively Impacts Your BusinessElder financial abuse and exploitation might not seem like a big issue for your business.
After all, you can easily fight chargebacks from disputed gift card purchases and win. But fighting those chargebacks may not be a valuable use of your time. Plus, do you really want to fight a chargeback from an elder who got scammed? You don’t want to make the victim feel worse.
But more importantly, you don’t want people to have a negative perception of your business.
On average, a dissatisfied customer will tell 9-15 people about their bad experience. That’s an alarming statistic that needs to be taken seriously. Because negative word-of-mouth or online reviews can significantly damage your brand reputation. In fact, 86% of consumers hesitate to make purchases from a business with negative online reviews.
Most people wouldn’t be okay with a criminal taking advantage of an elderly person. And consumers probably wouldn’t be ok with your business if they learned it was a conduit for that type of behavior and did nothing to stop it.
Ways to Spot Elder Financial Abuse and ExploitationSo how can you tell if elder financial abuse is happening at your business? There are a few red flags to look for that can indicate improper use of an older person’s funds or assets by another individual.
Keep in mind that these warning signs may indicate financial exploitation only when they come from persons over a certain age.
1. Increase in chargebacks
Kount® carefully monitors elder abuse and exploitation trends. In one particular case study, customers over the age of 80 accounted for just 2% of a business’s purchase volume. Yet they were associated with 14% of the business’s total fraud claims.
2. Sudden changes in account activity
If you notice an older customer making unexplained large withdrawals from bank accounts or draining stored value from online accounts, it could be that the customer was coerced by a criminal or family member.
3. Large gift card purchases
A person making multiple purchases of gift cards in high dollar amounts is unusual and could be suspicious. But when older adults make those kinds of purchases, it’s likely that someone has manipulated them.
Elder financial exploitation may be more common than you realize. Nearly 5 million older Americans are victims of abuse and exploitation each year. And the overall loss by victims is somewhere between $2.6 – $36.5 billion.
How to Stop Elder Financial ExploitationThough most state laws penalize those who victimize elders, many cases of elder financial exploitation go unreported. As a business owner, there are ways you can help prevent this kind of unlawful behavior.
1. Train staff on elder financial abuse.
You can try to stop financial abuse from happening in the first place by training your staff. Encourage staff members handling purchases to engage in friendly, yet probing conversations when people make large gift card purchases — especially if the customer appears to be in a targeted age group, or under duress.
3. Evaluate fraud data.
Use the data provided by your fraud detection software to perform a risk analysis on products and services that provide monetary exchange, such as gift cards, cryptocurrency, or account withdrawals. If you notice high levels of fraud claims or chargebacks, look for patterns in the customer data of those transactions.
There’s a close correlation between age and fraud. So high levels of fraud coming from customers over the age of 70, for example, could indicate that elder financial abuse is going on.
2. Flag certain purchases for review.
You can set up policies and controls to flag certain purchases for manual review. For example, if someone over the age of 70 is buying more than $1,000 worth of gift cards or other cash-like instruments, you can mark that transaction with a special reason code and escalate it to a customer care team. From there, a staff member can reach out to the customer for more details about the purchase.
4. Report suspected financial abuse.
If you suspect financial abuse, report it to local adult protective services or local police. Additionally, you can call the National Elder Fraud Hotline created by the Department of Justice to report an incident.
The National Elder Fraud Hotline can be reached at 1-833–FRAUD–11 (or 833–372–8311).
CASE STUDY: National Retail Chain Stops Elder Financial Abuse with KountKount worked with a national retail chain that was having problems with chargebacks and disputes. A strange pattern started to occur — the disputes kept coming from customers who bought thousands of dollars worth of gift cards.
So the retail chain reached out and discovered those customers were significantly older than the average customer. And they were being coerced into buying gift cards to send to criminals.
Using Kount, the retail chain was able to set up policies to flag gift card purchases over a certain amount from customers in a target age group. From there, a customer care representative contacts the customer for details and ultimately stops the financial exploitation scam.
If your business sells gift cards, cryptocurrency, or any other monetary instruments, it’s susceptible to elder financial exploitation. But we can help. Kount technology can detect this type of fraud and flag suspicious activity in milliseconds. Reach out to learn more.
In recent years, the restaurant industry has experienced a massive shift in customer buying behaviors. This is especially true for quick-service restaurants (QSRs). A post-pandemic world wrought with the rising cost of goods has led customers to expect high quality food at low prices, with easy online ordering and delivery options.
As a merchant in the industry, you have had to quickly adapt and respond to these new customer demands. But fulfilling those demands has also exposed you to new threats and fraud attacks that you don’t have experience with.
To keep up with evolving trends in the industry and to minimize risk, you need to be aware of the threats targeting your business.
Download our complete guide to learn more!
Learn more about the risks that are most prevalent in your industry — 7 Fraud Schemes Targeting Restaurants and QSRs.
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- Difficulty Managing Risk and Customer FrictionConsumers now expect flexible ways of ordering and receiving food from their favorite restaurants.
According to Restaurant Business, 60% of restaurant operators say that offering delivery options has increased their sales. Meanwhile, about 56% of customers and restaurant owners want online ordering in a restaurant app, according to madmobile. Some even want options to order digitally at a restaurant.
These trends indicate that, if you haven’t already, you may want to consider offering delivery services, online ordering, and in-store kiosks. Implementing these offerings are great ways to boost your business.
But they unfortunately come with a lot of risk. And managing those risks can be a challenge for a few reasons.
ExperienceManaging fraud is not your core competency — building the business is. So mitigating risks may not be part of your strategy at all.
Even if you are aware of the different types of fraud that are threatening the restaurant industry today, you might not know how to effectively deal with them.
Low Profit MarginsRestaurants generally have low profit margins, so you need to generate the most revenue possible. However, the more customers you bring in, the higher your chances are of accepting orders from fraudsters and opportunistic customers who increase your risk of fraud. And the more fraud you experience, the more revenue you’ll lose.
It is a vicious cycle of risk and reward.
Friction & False PositivesFraud management is all about detecting suspicious activity and stopping those who want to take advantage of you.
However, that review and decision-making process has to be completed in a matter of seconds. Because delays like additional verification steps or declined orders add unnecessary friction for your customers.
So the process has to be quick, and it has to be accurate. Because if you make the wrong decision and incorrectly block a good customer — a mistake known as a false positive — you will most likely upset that customer.
And upset customers probably won’t give you a second chance — even ones that used to be loyal. They might leave you for a competitor and never come back.
That’s a lot of bad news. But fortunately, there’s an easy solution: technology.
Fraud detection and prevention technology can be customized to detect the unique challenges you face with three major benefits.
- Accurate assessments: Technology can catch fraudsters without scaring away good customers.
- Quick decision-making: Technology makes decisions in less than 200 milliseconds.
- Easy implementation: A team of experts will help you set up the technology so you get the results you expect.
- Inundation of Account Takeover FraudCustomers are looking for more personalized experiences and rewards in exchange for their loyalty to your business. In fact, 43% of customers want restaurant loyalty programs.
Adapting these offerings is great for boosting your business, and you would be wise to do so. But they unfortunately come with a lot of risk.
Introducing loyalty programs and online ordering services means that customers will create online accounts. And because these online accounts — filled with payment information and rewards that are equal to cash — are incredibly valuable, they are highly vulnerable to account takeover attacks.
Account takeover (ATO) fraud is the act of breaking into a user’s account with malicious intent. This can be done through credential stuffing or brute force attack.
ATO attacks are an increasing threat. According to a press release from Restaurant Dive, more than half of the restaurants and grocery stores surveyed (54.2%) said they had seen fraud issues with their loyalty programs.
One of the reasons ATO attacks are so popular is because more than 60% of consumers admit to reusing passwords across online accounts. This means it’s relatively easy for fraudsters to gain access to accounts. And once they break in, they get access to valuable information that can be used or sold.
The consequences of account takeover fraud are severe.
The first thing you lose when an account takeover happens is revenue — lots of it. If one customer files a dispute for a $50 purchase, you lose that $50 plus the cost of the food — and you’ll have to pay for chargeback fees.
That’s just one customer. Imagine if you’re dealing with a massive attack and 1,000 customers file disputes for $50 or more. In 2021, the average cost of a data breach for hospitality services cost $3.03 million dollars.
Second, and perhaps more devastating, is that your brand image becomes tainted. An account takeover attack can cost customers up to $290 and 15 hours to resolve, according to an article from PYMNTS. That’s a lot for customers to deal with — and they are going to tell people how frustrated they are.
You may have already lost loyal customers to the attack. But you could lose more potential customers when you show up in news articles for fraud.
The key to preventing account takeover attacks is to make sure you have the right protection in place before an attack happens.
Implement a fraud solution that can assess suspicious behavior on your apps and online ordering systems. Then automatically block or challenge the behavior so that you don’t have to waste time guessing what might be wrong with your systems.
- Easy Targets for Card TestingCard testing is the process of making small purchases to test the validity of stolen payment information. And you are a prime target for this kind of fraud.
Fraudsters want to see if the stolen payment information is still good. They do that by making a low-dollar transaction that won’t be flagged as fraud. And QSRs are ideal for card testing because low-dollar transactions aren’t usually suspicious.
Plus, fraudsters can test dozens of cards at once, especially if you have an app. They might not need to actually buy anything to test the card. They could just add the card to the app and run it through authorization. And they can do that thousands of times in a row.
Simply submitting an authorization request might not seem like a big deal. But it is.
All authorization requests include a fee. Maybe it’s only a nickel per authorization. But if you have to pay a nickel for 10,000 plus interactions, the bill adds up quickly.
Declined authorizations also put your merchant account at risk.
If you have a lot of authorization declines for fraudulent transactions, banks will notice and label you a high-risk merchant. Then, when new transactions come in — even from good customers — banks might automatically decline the requests. This means you’ll lose lots of sales.
Unfortunately, it’s really difficult to track this kind of fraud on your own. Manually reviewing every small transaction to find the card testers would be a waste of your time.
Instead, employ a fraud detection system that analyzes data from a global network and compares that data to the interactions happening in your ecosystem. Then, you can decipher good activity from bad — and reject the bad automatically.
Fraud threats are dangerous. Protect your restaurant now.
We covered a couple of the top threats that can damage your QSR. But there are seven major fraud schemes you should be aware of. Download our complete guide to learn more — 7 Fraud Schemes Targeting Restaurants and QSRs.
Download now
Returns are commonplace in the retail and ecommerce industry, but they can put you at risk for refunding fraud – which can be costly.
Because refunds don’t come with a chargeback, refund fraud can be difficult to detect. But there are ways to prevent it — and that knowledge is key to helping you keep your hard-earned revenue.
What is Refund Fraud?Refunding fraud is about getting refunds without returning goods. For example, a customer buys an item, requests a refund once they get it, then makes a false claim that prevents them from sending the item back to you.
Ecommerce Return Fraud vs. Refund Fraud: What’s the Difference?Return fraud is about taking advantage of customer-friendly return policies. For example, a customer buys an item, uses it once, then returns it. Or the customer might try to return an item after your stated time limit.
Return fraud is closely related to refund fraud, but there are a few differences between the two.
Each form of fraud can wreak havoc on your sales. But fortunately, a lot of prevention tactics can solve both fraud schemes simultaneously.
How to Prevent Return and Refund FraudStopping return and refund fraud is about taking a proactive stance with preventative tactics. You need to have controls in place before an incident happens. So if you do experience one of these schemes, the policies and procedures you set can help you fight back against invalid returns and refunds.
Write Easy-to-Understand PoliciesCustomers and criminals often commit return and refund fraud by abusing loopholes in company policies. If you’re having issues with return or refund abuse, consider updating your policies.
Straightforward, effective policies make it difficult for customers to argue with. Make sure your policies are visible and easy to understand.
- Write clearly and concisely. Use straightforward language so that your customers can easily understand how your return and refund policies work.
- Set clear expectations. Lay out the steps of the return and refund processes. Make it known what is expected of the customer and how you respond to requests. If items are inspected when they’re returned, let customers know this up front to curb return abuse like product swapping.
- Tighten controls around certain goods. Lax return policies can build customer confidence. But they can also incentivize abuse. Consider tightening policies around merchandise that are more likely to be returned or stolen. For instance, set shorter return windows for electronics and jewelry. Or increase security controls to dissuade fraudulent activity.
- Make policies easy to find. Make your return and refund policies easy to find on your homepage. Also consider including links to your policies on product description pages and checkout pages. Then send a link or reminder of your policies in order confirmation emails.
Educate Customer Service and Logistics Personnel on Refund FraudCustomer service reps and logistics personnel are often one of the biggest attack vectors when it comes to refund fraud. Most methods actually rely on staff errors to work.
To combat refund fraud, it’s essential that you train both your customer service reps and logistics team regularly on order fulfillment and refund processes — at least quarterly. If you already do this, consider revisiting your training to make sure it accounts for new and emerging refund fraud schemes.
Below are some tips to consider when evaluating your training.
- Verify your order fulfillment process. Make sure your teams know how to package merchandise correctly to avoid the risk of damaged items. Give customers an accurate delivery estimate. And give your fulfillment team a way to report low inventory so that customers don’t wind up purchasing an item you can’t fulfill.
- Make sure customer service teams know which items do and don’t qualify for a refund or return. Having clear return and refund policies help customers and your employees. Your customer service teams should have clear guidelines and procedures for handling returns — including lists of items that qualify for returns, refunds, or store credit only and items that are non-refundable.
- Be on the lookout for refunding services. A refunding service is a fraud scheme where a professional refunder offers to obtain refunds on behalf of a customer for a fee. This scheme is massively popular and can devastate a business’s bottom line.
- Train customer service teams on how to identify social engineering attacks. Social engineering is about manipulating people to give away refunds, goods and services, or confidential information. And customer service teams are a prime target for social engineering schemes. Train your employees on these schemes to help them combat manipulative customers and prevent refund abuse.
Identify High-Risk Goods and ServicesSome goods attract fraudsters more than others. But how do you go about finding those high-risk goods — and how do you prevent them from becoming targets for fraud?
Follow these steps:
- Assign reason codes to each return and refund. Make sure your returned merchandise is always labeled with a reason code. And for any refunds issued, whether the merchandise is returned or not, make sure you keep track of the reasons for issuing those refunds.
- Look for patterns. Certain items may be returned more often than other items. Maybe there’s an item that customers often make false claims about to get a refund. If you notice an unexpected dip in revenue or an increase in returns, start looking for patterns in your return and refund reason codes.
- Remove inventory or change how customers get certain items. When you find patterns, you can either remove the problem items from your inventory or change the way customers can purchase certain items. For example, you can make some items exclusive to customers that open an online account with you — and reduce the risk of a fraudster trying to get the goods for free.
Consider the Likelihood of ChargebacksBefore accepting a return or issuing a refund, consider the likelihood of a chargeback.
Just because a return request is made doesn’t mean you have to issue a refund — even if it’s from a good customer. If a request violates your policies, you are well within your rights to deny the refund.
Remember, not all denied refund requests result in a chargeback. So sometimes it may be better to risk a chargeback than comply with a refund or return request — but it depends on your business.
If a customer is denied a refund, instead of opting for a chargeback, they may just decide to not do business with you anymore. While that might be scary, it may be better for your business than issuing a refund or return.
Keep in mind that if you deny a customer a refund and do receive a chargeback, you can fight it — and win. And if you win, you get to keep the revenue.
Before making the choice to risk a chargeback, think about:
- The customer lifetime value (CLV). If the CLV is low for a customer, denying them a refund might not impact your business as much as you’d think.
- The transaction amount. High-dollar amounts can actually be a sign that a customer or professional refunder is attempting refund abuse – and in that case, you may have much more to lose by issuing a refund.
- Your current chargeback-to-transaction ratio. If your chargeback activity is safely below card brand thresholds, you might want to risk the chargeback and then fight it.
- The current status of your business’s online reputation. How impactful would a bad review be to your business? If it wouldn’t be detrimental, you might want to risk denying the customer’s request.
Encourage Returns Instead of RefundsIf you don’t want to risk chargebacks, consider encouraging customers to return items if they don’t work out.
This might seem like a costly suggestion. Because with shipping and logistics fees, returnless refunds may seem like the better, hassle-free option. But they can drain your revenue. You lose the merchandise and the total revenue from the sale. You don’t get to resell the merchandise to other customers and recoup some of your losses.
Instead, entice customers to return items. Consider providing a return shipping label with a product if you know there is a chance it might not fit the customer’s needs — like shoes or clothing.
Add Refund Data Into Your Pre-Sale Transaction Screening ProcessYou may have every preventative measure in place, but refund fraud can still happen. When it does, it might be best to discontinue doing business with those customers altogether.
If someone requests a refund and you think it’s fraudulent, add that data into your front-end fraud screening so you can decline purchases from that person in the future.
Or maybe you have customers that are prone to abusing policies. Again, if they’re conducting fraudulent activity, you have a lot more to lose doing business with them than just the dollar amount on a transaction.
Get Help for Refunding Fraud From the ExpertsYou can spend countless hours trying to solve refund and return fraud abuse yourself — or you can get an expert to help you.
Kount is a trust and safety platform that gives businesses the confidence to safely interact with a variety of consumers globally. Our complete strategy solves all types of fraud, including return fraud.
Kount can:
- Detect potentially risky transactions and stop them from happening.
- Block fraudsters and opportunistic customers from stealing from you again.
- Fight chargebacks that happen after denying fraudulent refund requests.
Sign up for a demo to learn more.
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