We live in an increasingly digital world, where technology helps us accomplish tasks of all kinds throughout the day. With that in mind, it would be easy to think that the procedure for scanning and processing coupons in grocery stores, restaurants, department stores, and other outlets would be streamlined through technology. Surprisingly, that’s not quite the case.
It is still far too easy to create, buy, redeem and use counterfeit coupons. In recent years, there have been several high-profile counterfeit coupon busts orchestrated by the FBI and state police departments. Last year, a film called “Queenpins” starring Kristen Bell and Vince Vaughn was released, telling the story of a counterfeit coupon operation that was busted by the FBI and saw investigators uncover over 25 million counterfeit coupon dollars, 22 assault weapons, 21 vehicles, and a 40-foot boat. The scam on which the film is based is one that trapped a list of 40 major manufacturers, including Procter & Gamble, PepsiCo and Hershey. Police estimated that hundreds of millions of dollars were lost in profits, the majority of which was due to counterfeit coupons.
While this shocking story has caught the attention of Hollywood directors, it’s not exactly a rarity. There have been other large-scale coupon fraud busts in recent months, including an incident that saw a Virginia man sentenced to more than seven years in prison. In addition to the prison sentence, he was ordered to pay $31 million in restitution in what prosecutors described as “what could be one of the biggest counterfeit coupon schemes in history. “.
The problem with existing technology
Looking at the scale of the crimes mentioned above, it is clear that the existing technology used to process coupons and verify their authenticity is simply not enough. Even with the shift to online shopping and the increased use of digital coupons in the wake of the pandemic, fraud has remained a huge problem.
In fact, digital coupons may even contribute to an increase in the number of people who overuse coupons, as online retailers expand discount codes to attract new shoppers and build customer loyalty. While an effective marketing tactic, distributing digital coupons carries a level of risk, especially if shoppers abuse referral programs to proliferate or reuse coupons.
In 2020, a fraud detection report published by Forter highlighted a significant increase in coupon abuse, which increased by 133% between H2 2018 and H2 2019. This was attributed to excessive code sharing of coupon by users and merchants who are unable to take precautions. place to deter this kind of abusive behavior. At the time of the report, coupon fraud was estimated to cost businesses between $300 million and $600 million each year.
One of the issues fueling coupon abuse is the migration to mobile devices. Across the industry, the technology and standards implemented for coupon redemption have not been uniform. The result here is that there is a fragmented and siled coupon distribution landscape. This can be – and has been – exploited. The old coupon format, AI (8110), has experienced significant levels of fraud due to the fact that it is not possible for retailers and brands to exchange real-time data.
Another reason why coupon abuse has proven so easy for criminals is that the existing coupon verification process is both time-consuming and labor-intensive. Each year, more than 1.7 billion coupons are redeemed in the United States, with the annual consumer packaged goods (CPG) industry spending $225 billion on promotional activities such as coupon distribution. Most coupons scanned in stores and redeemed in the United States are shipped to Mexico for careful manual reconciliation, creating a fraud-prone process.
To bring this process into the 21st century, we turned to distributed ledger technology (DLT), more commonly known as blockchain technology. Simply put, DLT is a decentralized database for storing and sharing information and assets securely and in real time, rather than being controlled by a centralized authority. With a decentralized blockchain ledger, the blockchain protocol remains secure even when some of the computers on the network are acting maliciously. The result? Records of information recorded on the blockchain are virtually tamper-proof and therefore anyone can verify the information recorded there.
Solve the problem with Blockchain
Given the seriousness of the losses and criminal activities in the voucher industry, stakeholders have started to take action. Groups such as the Association of Coupon Professionals, Joint Industry Coupon Council, Consumer Brands Association, Food Marketing Institution and GS1 have worked with The Coupon Bureau to establish a universal digital coupon for the retail industry to ‘improve coupon security and reduce fraud. . Universal Digital Coupon leverages Hedera Hashgraph’s DLT technology and Hedera Consensus service to phase out legacy coupons and replace them with a more secure alternative.
Using this next-generation DLT means having a decentralized ledger, updated in real time, to instantly verify the authenticity of coupons, which can be fully trusted. In more detail, at the center of this universal coupon standard is a single source of truth or “master offer file” created by manufacturers. All stakeholders can access the file in order to perform their specific functions – from distribution and validation to clearing. All data associated with this process is accessible through a set of standardized APIs, allowing retailers to connect, validate and retrieve offer details, while reporting to all stakeholders involved in each coupon. By the end of 2021, this technology should be integrated into more than 75% of food retailers.
This new coupon standard is expected to reduce coupon fraud by millions of dollars annually. This will have a significant impact on consumers, as retailers will no longer have to find other ways to compensate for lost business due to coupon misuse. Of course, the Universal Coupon Standard also has a range of benefits for coupon industry stakeholders, including increased efficiency, increased accuracy, significantly reduced risk of fraud, and reduced billing and billing disputes. of settlement. Overall, this is a significant step forward for retailers and manufacturers who have long been looking for ways to eliminate coupon fraud.
Christian Hasker is Marketing Director at Hedera Hashgraph, a distributed ledger technology.