Deep Dive: How AI Can Help QSRs Profit By Quashing Fraud And Keeping Customers Satisfied

Restaurants are facing pressure to meet customers’ demands for improved convenience and personalization as well as touch-free ordering and payment methods as the COVID-19 pandemic maintains its grip on the nation. Many QSRs had already been implementing digital innovations to boost their order-ahead capabilities before the health crisis hit, but consumers’ dramatic shift toward remote ordering has led some eateries to boost their investments in advanced technologies, including artificial intelligence (AI). 

Some of the most well-known chains are warming quickly to AI to help them streamline processes for consumers ordering remotely. Fast-food heavyweight McDonald’s agreed to purchase or buy a stake in three AI companies, for example, most recently acquiring a voice-based AI system designed to help better understand customers’ drive-thru orders. The chain also took a minority stake in a New Zealand-based mobile app vendor specializing in AI-driven mobile engagement and loyalty programs, revealing its commitment to leveraging the technology for mobile order-ahead operations. 

McDonald’s and other large QSR brands appear to be ahead of the curve, however. One recent study revealed that more than two-thirds of restaurant owners are not yet ready to embrace AI, with some respondents noting that they do not understand the technology and are worried about its cost. Research nevertheless indicates that investing in AI could be well worth it for businesses, as those that have implemented the technology say it has allowed them to shift their attention from automating employee and customer processes to setting and implementing expansion goals. One survey reported that 31 percent of AI-focused companies have witnessed increased revenues, 22 percent have improved their market share and 21 percent say it has helped them expand globally. 

The following Deep Dive examines what QSRs stand to gain from adopting AI — especially as they fight against fraud — as well as how their operations can benefit from strategically investing in the right technologies. 

Using AI to Quell Fraud

The food and beverage industry has recently witnessed upticks in friendly fraud, which occurs when consumers pay for and accept goods or services but then report that the transactions were unauthorized.

One study revealed a 79 percent increase in fraud in the sector in 2018, while 28 percent of respondents in the industry said they experienced chargeback rates of between 0.5 percent and 1 percent of all transactions — with one in 10 reporting even higher rates. Experts have said the pandemic is likely exacerbating these issues, making it even more critical for restaurants to deploy technology that addresses friendly fraud.

AI-based security measures can be implemented across all business sectors, including the QSR industry, to keep friendly fraud in check — especially as an increasing number of interactions move online via mobile channels. Many cases of friendly fraud can stem from card-not-present (CNP) transactions, but a significant share can also be attributed to legitimate customer service friction, for which AI-based solutions can also ensure customer engagement and quick resolutions. 

Fighting Fraud While Elevating Customer Experiences

AI algorithms can also allow QSRs to determine customers’ locations and which devices they are using, as well as illuminate other data points, enabling them to compare transactions against consumers’ purchase histories to ferret out irregularities. The technology can process large amounts of data in mere seconds, freeing staff from this time-consuming task and allowing them to focus on more complicated cases. Many QSRs are interested in leveraging AI to thwart fraud — both friendly and otherwise — but the technology could also be valuable to enhancing the customer experience. It can be utilized for voice-enabled ordering, for example, and can even access customers’ order histories to offer menu suggestions tailored to their individual tastes.

Restaurants and other businesses are often reluctant to implement any authentication features that could add friction to the ordering process, especially as many worry that they could scare off consumers, who are spoiled for choice when it comes to QSRs that offer mobile ordering options. Research suggests that adding so-called positive friction, which affects consumers’ journeys either not at all or only minimally, could help restaurants safeguard their platforms without frustrating customers and prompting them to abandon their orders. AI, which can be used in the background to assess transactions and weigh in on their legitimacy, can be considered a form of positive friction. 

More QSR consumers are turning to mobile ordering channels to purchase their meals, and this shift is making the industry an especially high-profile target for fraudsters and friendly fraud. Leveraging AI could be key to helping restaurants simultaneously thwart fraud while offering consumers smoother — and thus repeat — experiences.