Fraud is challenging. It haunts businesses across all sectors, but it presents a particularly complex battleground for digital ride-hailing platforms. No matter on which scale it is being carried out, it affects businesses at some or the other level. The ride-hailing industry is on the rise and is projected to experience substantial growth, with revenues expected to soar from $167.6 million today in 2024 to $212.8 million by 2029. That’s 26.9% growth in 5 years!!!

The increasing numbers and rapid expansion in recent years make it an attractive target for fraudsters, who are eager to exploit vulnerabilities within these platforms.

An example of how challenging fraud can be in the ride-hailing industry is Uber's Referral Fraud Incident of 2014. In this case, a user exploited Uber's referral program by posting a promo code on Reddit, which allowed him to sign up multiple accounts and earn approximately $50,000 in free ride credits. This incident was an eye-opener for the industry as it was highlighted: 

• how fraudsters can manipulate promotional incentives to extract significant financial benefits

• how a small loophole can result in considerable losses for the ride-hailing company

• how difficult is it to analyze fraud unless it is committed

So a big question stands.

If fraud is challenging, does it mean that dealing with fraud is also equally complex? 

Is it challenging to deal with fraud in the ride-hailing industry?

The answer is a resounding NO. 

It's really NOT that challenging to deal with fraud in the ride-hailing industry if you:

• Understand the major types of fraud prevalent in the industry.

• Can predict the potential impact of fraud on your business.

• Implement device fingerprinting technology within your system.

Let's have a look at all these three:

Major Fraud in the ride-hailing industry

Impact of Fraud on businesses in the ride-hailing industry

The 4 major impacts of fraud on businesses in the ride-hailing industry include:

Loss of Revenue: 

Incentive abuse or fake transactions occurring on the platform due to fraud lead to inflated costs. From the perspective of customers, this degrades user experience which for businesses eventually leads to a loss of revenue. 

Example: The Uber promo code abuse of 2014 which approximately costed the company loss of $50,000 in free ride credits

Increase in Operational Cost:

If there is regular fraud, businesses need to invest resources and money towards building a dedicated team for fraud management. Suppose fraud occurs and cannot be controlled by the team then there is additional cost.

Example: Ride-hailing platform Lyft suffered a loss of over $1.0 billion in the fiscal year 2021 majorly due to a rise in fraudulent activities, particularly related to fake driver accounts and ride-sharing scams.

Dent in the Business Reputation:

Fraud is not a one-time occurrence; it leaves an impact for a very long time. Any form of fraud on a digital platform causes significant damage to the platform’s reputation, decreases user trust, and lowers adoption rates. 

Example: Didi, China's largest ride-hailing service was fined $1.2 billion in June 2021 after customer data loss due to fraud. This incident not only resulted in financial penalties but also eroded user trust in the platform, leading to a decline in user adoption rates 

Chances for Legal Risks:

Fraudsters are on the lookout for extracting money from users which in ride-hailing companies are drivers and passengers. If online businesses experience such losses they may face legal consequences or regulatory scrutiny from the local authorities.

Example: Uber faced legal consequences when the Australian Competition and Consumer Commission (ACCC) fined the company $26 million after fraudsters impacted the app by displaying false cancellation warnings.

Which is the Best Way to Deal with Fraud in the Ride Hailing Industry?

Business owners must learn how to smartly deal with fraud in the ride-hailing industry by leveraging from the latest technology. 

Wondering which technology I am referring to - The Device Fingerprinting Technology for Fraud Detection. 

This is one of the advanced technologies that is efficient in stopping fraud on mobile apps and web environments. From the largest fraud syndicates to the average opportunists, device fingerprinting technology can identify fraudsters’ devices with absolute certainty.  It takes away the sting from the fraud attacks by narrowing down the time taken to detect fraud and identify fraudsters.

Using a device fingerprinting technology-based fraud prevention solution, ride-hailing businesses can make precise decisions about device trustworthiness with the global standard for device identification.