GoTab’s Loss Prevention Features
Typically, there are two types of losses with credit cards. First there are chargebacks that are “friendly fraud”; i.e., I really regret the fact that I just bought this fancy steak and wine and so I’m going to charge it back; or, “unfriendly fraud”; i.e., My credit card was stolen and I wasn’t there so I’m going to charge it back because I didn’t make the purchase.
The second type of loss is insufficient funds. Here, we have two categories as well. There are the “oops” i.e., I just bought more food or drink than my credit card has funds to cover, and I walked out and didn't think about it. The second category is actual fraud; i.e., I bought more food and drink knowing full well that my credit card doesn't have the funds to cover and I left because I knew that I wouldn't actually have to pay for it.
GoTab Offers Three Solutions to Combat Credit Card Losses:
- Fraud Detection for Takeout – Takeout is the place where we see the most chargebacks and the most stolen credit cards. We use an identity tool that will identify fraudulent behavior and flag those orders and guarantee them so that they don't end up going through in the system.
- Swipe Fraud Prevention – This is more of a problem in bars,clubs and places where you have a lot of open tabs and high alcoholic beverage consumption. In this scenario, the guest will open a tab by swiping a credit card, which is not compliant for merchant chargeback protection. Unfortunately, even leading Point-of-Sale (POS) systems still support swipe since some merchants have considered it the fastest way to open a tab.
However, swiping is not considered secure for merchant chargeback protection. GoTab supports dip and tap which are EMV (Euro, Mastercard & Visa) compliant.
So, if the customer opened the tab with a swipe, the restaurant owner is responsible, and all of those chargebacks will be lost even if the guest was actually present, and they signed the receipt.
If the card is dipped or tapped, it’s the opposite. Those credit card payment methods are considered secure by the card networks and the consumer will be held liable, they will be deemed to have been on-premises, and they will be held responsible for payment of that tab.
The key is that GoTab is always looking for ways to make the guest experience better and reduce risk at the same time. GoTab will let you open a tab with an Apple Watch, an Apple Phone or a Google Phone using a digital wallet. Opening a tab in this way reduces chargebacks and simultaneously makes the guest experience more seamless and easier.
- Pre-authorization Fraud Prevention – Most Point-of-Sale (POS) systems only pre-authorize a card once, meaning they run a penny or they run a dollar transaction on a credit card and they do what's called an authorization that verifies that the credit card is legitimate and there are funds on that credit card. The challenge with that is that is the one and only transaction they run.
If you're in a place like a bar or nightclub where the tab ends up being a large sum i.e., hundreds or thousands of dollars, the difference between a dollar and $1,000 is quite large. And what we have seen is, now with mobile phones, people who are intentionally defrauding a venue will turn off the card in the credit card app or bank app so that the merchant can’t capture the final payment at the end of the night. That will show up in the POS as an insufficient funds charge. The staff will have to keep trying to manually charge the card several times or just take it as a loss. This type of fraud can result in significant “hidden” losses for the merchant. It can add up to .25% to .5% of all revenue. And in that scenario the merchant has also provided the customer with the product, so the losses are compounded.
GoTab’s Insufficient Funds Protection increments each new authorization to the new balance due before the merchant provides the product. Each time the customer buys another product, GoTab increments the authorization to the new purchase amount. It’s a single transaction; not multiple. And at the end of the night, GoTab captures the full amount. Even if the customer turns off their credit card, we know the funds are there because they’ve already been authorized and locked by GoTab.
Finally, because GoTab started as a QR ordering system, we built a fail-safe to protect our merchants that is native to the application and that no other system provides. If a credit card fails, we don’t allow the guest to open a tab at another GoTab location until they have paid off the failed tab. You can only have one open tab with a balance due that has failed to capture with any GoTab location globally. Until that balance is paid, you will not be able to make another purchase at a GoTab Venue.
People aren't always intentionally fraudulent. There's usually a combination of negligence and fraudulence that result in credit card losses. With GoTab, when someone accidentally doesn't pay their tab, we just text message them politely and ask them to pay the tab. We always try to strike the balance between protecting your interests and making sure you get paid and being polite to the guest because we assume positive intent.
Tap Room Playbook Episode 2:
When you really think about it, with everything managers need to do in a tap room, the hospitality aspect is often overlooked.
Watch Now →.webp)
Tap Room Playbook Episode 3:
The best breweries pay attention to what their brand stands for. How do the best brewers bring their brand to life?
Watch Now →