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Business Advice

End of free lunch for e-chop cheats

Digital loyalty card operators prevent copying of QR codes to claim rewards.
The Straits Times - October 3, 2012
By: Irene Tham
| More
End of free lunch for e-chop cheats Gozo Labs, which distributes the around! app, advises merchants to scan the QR codes with their customers’ smartphones after they have paid for their meals. This is aimed at stopping cheats from taking photos of the codes with their smartphones, which a

THE increasing popularity of digital loyalty cards has resulted in more convenience for consumers who do not need to stuff their wallets with too many pieces of plastic.

But it has also created a new perk of its own. Some consumers have been exploiting a loophole that allows them to accumulate free electronic stamps without buying anything.

Mobile phone apps like Perx and around! are designed to give patrons a loyalty-based reward just like traditional loyalty cards made of plastic or paper.

Users first need to download the app, which contains a QR (or quick response) code reader.

After they buy a product, they launch the app and select the relevant loyalty card. They then scan a QR code supplied by the merchant's staff to receive an electronic stamp.

In this way, a customer can get, say, a free drink from a coffee chain after accumulating 10 stamps.

But some consumers are circumventing the system by using their smartphones to take a picture of the QR code when counter staff are not looking.

The code is later reproduced for multiple scans by other users who have not bought anything to warrant the rewards.

Perx, which launched its digital loyalty card system last October, confirmed with The Straits Times yesterday that QR fraud happens but added that it affects less than 1 per cent of its 400,000 transactions to date.

The Perx rewards system is used at 700 retail locations in Singapore, including Salad Stop!, Red Mango, Spinelli and Four Seasons Durians.

Another e-loyalty card technology firm, Gozo Labs, said it detected "a few incidents" of fraud in the past year.

Its around! app, launched a year ago, is in use at about 100 locations including restaurant chains Long John Silver's and Pu Tien Restaurant.

To stamp out fraud, Gozo Labs has advised merchants to scan the QR code on behalf of customers specifically to deter cheats.

Perx, on the other hand, has been working with cash register makers like NCR and ePoint Systems to allow merchants to generate a unique QR code for every transaction.

Printed on customer receipts, the code - with Perx's own algorithm for fraud detection - is good for only one scan.

Other users who try to scan the same code will be rejected by its system.

Perx has been testing its new system since June with several merchants, like pastry chain Four Seasons Durians and Freshness Burger.

Merchants have not had to pay extra for the technology.

"A unique QR code on receipts is certainly the way forward. It saves time for cashiers and prevents abuse," said Four Seasons Durians general manager Donald Tan.

Perx is bankrolled by, among others, Facebook co-founder Eduardo Saverin, who is based in Singapore.

These efforts to plug the technology loophole will thwart users like "Michael", a 31-year-old engineer who did not want to give his real name.

He admitted to illegally "topping up" his loyalty points at Salad Stop! since late last year and redeeming four free salad wraps.

When told of Perx's new security initiatives, he said: "It's too bad but I guess there is no such thing as a free lunch anyway."

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