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Devastating Effects of Buyback Scams on Small Businesses and Restaurants

Devastating Effects of Buyback Scams on Small Businesses and Restaurants

What are Buyback Scams? 

Anyone in the restaurant business has had a tough year. Forced to close during an unprecedented global pandemic, many businesses have been forced to get creative and look to food delivery and pickups to keep their businesses afloat. Despite knowing these struggles, some people are still using this crisis as an opportunity to bleed restaurants with credit card scams and fraudulent deliveries to get a free meal off already suffering businesses.

In a 2019 Nilson Report, it was found that over 28 billion dollars were lost due to credit card fraud and scams. Julie Conro, a research director for Aite Group fraud and anti-money laundering practice said in an interview with CNBC that there are as many as “$11 billion losses due to credit card fraud” in the US alone. Restaurants in this climate are especially vulnerable due to ever-increasing reliance on credit card purchases for their orders, with small businesses being hurt most of all.

The sad reality of scams (the Why)

A local Los Angeles Favorite, Spoon by H is an especially tragic victim of these crimes. As first reported in the LA Times, Spoon by H was a healthy robust restaurant known for its delicious Korean fusion and outstanding service for the past 9 years. Being mostly a sitdown restaurant, Spoon by H was already hard-hit after being forced to close their indoor seating due to the pandemic. However, just as Spoon by H was adjusting to the new pandemic reality, disaster hit. Over the next few months, Spoon by H was hit with these dispute fraud scams where scammers charged large orders for pickup and delivery, left out their vehicle information, and then later used that omission to dispute the charge and pay nothing for often hundreds of dollars in food. On November 18th, Spoon by H was hit by a scammer for $728.76! After this and other scams made the costs too hard to bear, on February 22th, Spoon by H announced that they are closing their doors for good.

Spoon by H is unfortunately not the only restaurant to be affected by these scams. Ktla5 reported that Luv2eat, a popular Thai restaurant in Los Angeles, was also affected by these scams. With an ever-growing demand for food deliveries and still no certain date for restaurants to open, these scams have unfortunately become a tough cost of doing business.

How apps are helping restaurants during this crisis

The good news is that food delivery apps are increasingly helping their restaurant partners with the help of AI and security software in order to stem this tide of fraud. Some delivery apps have responded to this crisis. Grubhub stated that they will ban any customer that misuses their platform, and work to refund the order amount to the restaurant, with Doordash declaring their own similar policy.

Companies like GoGoo.Me and others were so disgusted when they heard that Tock, the app that was used by Spoon by H, failed to act responsibly for the fraud, they changed their whole dynamic around making sure that their business practices reflected supporting restaurants who are hit by these chargeback scams. 

GoGoo.Me believes that by using financial infrastructures like Stripe, they are showing that they prioritize helping protect their restaurant partners from this growing threat to their business.  Services like Stripe (used by Google, Zoom, Instacart, GoGoo.Me, and many more) are using behavioral analysis to study patterns of fraud to stop transactions that are suspicious before they happen. They hold a PCI level 1 service provider certification, the highest rating in the country for financial infrastructure which is why they are considered the most reputable financial highway in the world.

GoGoo.Me doesn’t just stop at investing in big companies with fancy certifications though. Started with 3 dads trying to help their community, GoGoo.Me works with these security firms but monitors each case of fraud or suspicious activity individually. Their system has a personal feel, no reliance on call centers so that restaurants know that an actual person is dedicated to helping them during their crisis. GoGoo.Me believes in helping their partners in any way they can, not just adhering to a policy of doing the minimum. In these dark times, GoGoo.Me handles each challenge that their restaurant partners face person to person, with respect and more than a little love.