A concerning online voucher scam is targeting restaurants using Square, a popular point-of-sale platform. The scam exploits vulnerabilities in Square’s voucher system, leaving businesses out of pocket for fraudulent purchases.
How the Scam Works:
- Scammers purchase vouchers online, either with stolen credit cards (third-party fraud) or by fraudulently claiming their own card was stolen after purchase (first-party fraud).
- Scammers use the vouchers to dine at restaurants, often choosing smaller businesses with limited customer records.
- Scammers then initiate chargebacks with their financial institutions, claiming the voucher purchases were unauthorized.
- Square automatically deducts the disputed amount from the restaurant’s account, leaving them liable for the fraudulent transaction.
Impact on Restaurants:
- Soul Dining, a Sydney Korean restaurant, lost over $2400 to the scam and has temporarily disabled online vouchers.
- Lokha Viet Fusion, a Vietnamese restaurant, was hit with a $145 chargeback for fraudulent vouchers.
- Lenny Briskets, a sandwich shop, identified and cancelled suspicious voucher transactions before incurring losses.
Industry Concerns:
- Restaurants are concerned about the financial impact of these scams, especially during challenging economic times.
- The scam highlights potential vulnerabilities in Square’s online voucher system.
- Businesses are hesitant to implement additional verification measures (e.g., checking ID) fearing it may disrupt customer experience.
Square’s Response:
Square acknowledges the issue and recommends that businesses enable 3DS technology. This security feature requires buyers to verify their identity through their bank, potentially shifting liability for fraudulent chargebacks to the card issuer.
Businesses should be cautious of customers paying with online vouchers, especially those with large denominations. Consider implementing 3DS technology if using Square for online vouchers. And report suspicious activity to Square and local authorities.