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This is page 4 of:

Check-In Cheating: Shopkick Retail Mobile System Easily Faked

February 24th, 2011

Part of the strategy behind Shopkick’s defenses is simple minimization. How many fraudsters will bother to do this? With the anti-fraud provisions in place, even a dedicated thief can’t trick the app too often or alarms will go off. Shopkick is also watching for consumers who are using multiple accounts. With only one account, it would take a long time to generate sufficient incentives to make it worthwhile for a consumer.

Given how very low the barrier to entry for the fraud is, the incentives for the fraudsters don’t need to be very substantial to make it worth their while. From the fraudsters’ perspective, that’s a good thing, because the incentives are indeed quite low. One of the knocks on the way some of these check-in systems—Foursquare is another good example—have been implemented by retailers is that the incentives given to consumers to use this unfamiliar application, to engage in a very new behavior, are so low as to barely incent many.

The type of incentives Target chose, for example, include small discounts on higher priced products, the same type of incentives the chain would typically offer to consumers for free.

The concern over this fraud is not that consumers will falsely ring up millions of dollars in unearned discounts. The incentives are too low for that to happen. The concern is simply that it makes it almost impossible for a retailer to trust that the numbers seen are legitimate.

Today, vendor incentives of various forms mean that the major chains are likely not paying much—and, most likely, nothing at all—for participating in these mobile trials. That means that even if it yields just a few new customers, it’s worth it. What about months from now, though, when retailers will be expected to pay for every customer who checks in? Does this undermine the faith in the accuracy of these first-generation mobile systems?

Editor’s Note:

  • Page 1 of this Special Report covers The Fake And How It Works.
  • Page 2 covers GPS Problems
  • Page 3 covers Putting It Into Fraud Context
  • Page 4 covers Shopkick Defenses

    Analyst Nick Holland said he prefers NFC tags for location systems. “It becomes cost-prohibitive to fake NFC tags, as opposed to a sonic frequency,” which is what Shopkick uses, he said.

    Emigh said that the Shopkick team knew of the potential for the sound-recording fraud before they launched. When asked if Shopkick mentioned that possibility to any of the retailers—when they were pitching them to use the system—Emigh said that the details of the specific conversations they had with retailers were confidential.


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