A staggering amount of money passed through restaurants every year. In the US alone, restaurant sales are forecast to hit $997 billion during 2023, according to the latest National Statistics. Restaurants process customer orders and payments, use reservation systems, deal with invoices from suppliers, run staff payroll and more. This involves them processing credit card details and handling other personally identifiable information, such as customers’ names, telephone numbers, and home addresses.
As such, restaurants are increasingly turning to AI-powered solutions such as transaction monitoring and data enrichment, to take an algorithmic, rules-based approach to screening purchases, transfers, and other business interactions. Doing so means that restaurants can ensure financial compliance, including complying with anti-money laundering and terrorism financing obligations, while also taking a robust approach to fraud detection and prevention.
Why Keeping Financial Information Safe Is Tough for Restaurants
Restaurants must comply with data protection regulations around keeping customers’ information safe, as well as with requirements relating to anti-money laundering legislation and other financial regulations. Adding to the complexity is the huge rate of staff turnover that restaurants deal with. By some estimates, staff turnover is as much as 75 percent in the restaurant industry.
All this presents a major challenge in terms of protecting restaurants from phishing and other cybersecurity threats. POS systems tend to be the most fruitful attack targets for cybercriminals, with 75 percent of restaurant data breaches being traced back to compromised POS systems, according to a 2016 Trustwave Global Security Report.
The increasing reliance on digital payments is putting further pressure on restaurants when it comes to keeping customers’ financial information safe. The rate of people moving away from using cash is rising steadily. In 2018, 29 percent of Americans reported that they made no cash purchases in a typical week; by 2022, that figure had risen to 41 percemt.
Then there is the fact that consumer habits learned in lockdown have stuck, with restaurants processing a greater number of telephone orders and deliveries than they used to. This means even more personally identifiable information passing through restaurants’ systems.
A New Approach to Financial Compliance
All of this means that restaurants have plenty to do when it comes to protecting the financial and personally identifiable information that they process. Cybercriminals are rapidly embracing the potential of AI, so restaurants need to keep pace by doing the same.
This is where AI-powered technology such as transaction monitoring software comes in. It enables restaurants to both periodically review transactions and to monitor them in real time. Doing so efficiently is essential for instant payment systems, which is why transaction monitoring software is using automation and machine learning (whitebox, blackbox, or both) to deliver the security that restaurants need.
By identifying data that may signify fraud or other financial crime is being attempted, transaction monitoring software can serve as the first line of defense when it comes to restaurants protecting their customers’ data and meeting their financial compliance obligations.
Digital footprinting tools can also help with this. AI-powered solutions mean that restaurants can automatically find out a great deal about a customer, even from a single data point. By looking at customers in depth, venues can quickly and easily identify customers whose details don’t return expected results. An IP address showing as being in another country, or multiple orders all from the same IP address are examples of potential red flags when it comes to spotting attempted financial crimes.
The idea of these rapidly evolving solutions is that they enable business to meet their operational and legal requirements while identifying potential fraud before it happens, rather than after.
Don’t Forget the Human Element
While increasing automation and the power of machine learning can do much to help restaurants achieve financial compliance and prevent fraud, doing so is not a job for technology alone. Certainly, the arrival of this AI-powered future is a positive step, providing restaurants with more powerful digital tools than ever before. However, staff training and intervention are still required.
Restaurant staff needs to understand their financial compliance obligations and the role they play in adhering to these. They also need to be fully trained on using transaction monitoring and other software correctly – including how to deal appropriately with any instances where AI-powered systems flag up that something may be amiss. If staff aren’t appropriately trained, they can quickly become the weak link in ensuring financial compliance. Given the real time nature of restaurant payments, staff must often respond immediately to any issues that arise. The confidence that results from regular training should enable staff to do so appropriately, without feeling flustered by the situation and thus being more likely to make a mistake.
The Future for Restaurants Is Powered by AI
AI-powered solutions are reshaping the way restaurants adhere to financial regulations and safeguard against potential risks such as fraud and non-compliance. Such advanced technology is becoming ever more deeply integrated into the way that hospitality businesses operate, delivering a significant change across the industry in terms of meeting legal financial obligations.
The role of AI in transaction monitoring, in particular, has had a transformative impact on restaurant financial compliance practices, ultimately leading to enhanced efficiency, transparency, and security in managing financial transactions within the industry. As the role of AI in such solutions continues to expand, it is reasonable to expect that restaurants will benefit from further advances – potentially very rapid ones – over the coming years. As such, restauranteurs will need to keep abreast of this changing landscape, as both the technology and regulators’ requirements evolve to keep pace with developing cybersecurity and financial crime threats.