[Ayesh]

Many small scale food delivery startups have already solved this problem.

Phone number verification is the first like of defense. The delivery person might need to call you anyway, so it's an okay compromise to verify the phone number. Only accepting phone numbers from the sake country as you deliver is an added defense, but makes it somewhat inconvenient for travelers without local phone numbers. I'd ease this requirement for neighboring countries (accept US or CA numbers within those two, any EU number within the EU, Singapore+Malaysia, Nepal+India, etc).

Second, adding a card number requires verification too. Charge a small amount, and flag to the payment provider to require secondary authentication the card owner has with the bank. Any serious card owner should have Visa 3D Secure, Mastercard Code, or something similar setup).

This will leave legitimate gift senders (sending muffins to a friend in birthday while I'm in a different country) and travelers, but you'd make that lost revenue by cutting losses for fraud.

[Gaessaki]

We’ve had phone verification since day one. We’ve left the secondary verification stuff up to Stripe, maybe that’s the next place to look.

To be fair, the card fraud is not driving the business into the ground per se, just more annoying when it happens :) solving the problem is more of an opportunity cost thing for us

[Ayesh]

I see. One similar food delivery business I consulted at had a healthy (for the startup) margins at 30% from each order, so I suppose it's beefy enough to absorb some fraud.

Not to derail from the discussion about Stripe, but having a local payment processor helps a lot. In countries with foreign reserve woes (Sri Lanka and Turkey for example), Central Banks impose additional restrictions when paying foreign entities with cards. This can be in stamp fees (about 2.5% of the amount) or a daily/weekly cap on the amount.

For example, hardly anyone uses their credit cards with Uber in Sri Lanka because of this, and a local startup takes many times more orders because they partner with a local payment processor and charge the card as a local entity, sometimes with lower fees too.

[Gaessaki]

That’s an incredible margin. Is this gross before paying out drivers or after?

The suggestion for a local payment processor is a good one. We have another processing entity here in Canada called Interac whose fees are considerably cheaper, though consumers don’t reap the benefits of credit since it’s debit.

I’ve also read about Uber’s efforts accepting cash payments which I found to be very interesting: https://www.uber.com/en-EE/blog/india-growth-cash-payments/

[Ayesh]

In Sri Lanka (where I currently live and run a bakery business), Uber and the local competitor both charge 30% from the shop. This is in addition to a (mostly) flat fee charged to the customer for delivery, and 100% of it goes to the driver. They take cash payments as well. The amount of cash payments the driver collected is deducted from his weekly payout.

To be fair amount the margin, the drivers are paid for completing 20, 50, 100, ... deliveries, which is the bigger portion of their income.

In Indonesia, Grab and Gojek both charge 20-30%, if I'm not mistaken. In Vietnam, Grab, Gojek, and Baemin all charge about the same too. I have lived in Indonesia and Vietnam, and have seen the very same shop marking up the delivery fee into the food. I imagine this is a common practice in Asia at least.

[wzwy]

> I see. One similar food delivery business I consulted at had a healthy (for the startup) margins at 30% from each order, so I suppose it's beefy enough to absorb some fraud.

Alright, cool, a consultant. And then…

> Sri Lanka (where I currently live and run a bakery business),

And suddenly a bakery business.

I wish my life one day would be as interesting as yours. HNers are quite interesting.

On topic, FoodPanda is another popular one I’ve seen in Asia. And yeah, the markup for all of them seems to be close to your stated range. Though, it seems that Grab’s delivery fee changes depending on the number of available drivers (motorcyclists?) unlike their competitors like FoodPanda which is static from my experience.

[Ayesh]

The bakery is mostly for the excitement, although it is turning profit so I'm not complaining. I'm only investing and and involved in a small level, with a chef and a manager I hired. But it was a wonderful experience arranging stuff from ovens and mixers to signboards and corrugated boxes, with all minor details in between.

Things tend to be cheap in Sri Lanka, and rent isn't really that expensive, so it was not that difficult to start the business.

[Ayesh]

@wzwy (because I can't reply to deeply nested comments I suppose).

The bakery is mostly for the excitement, although it is turning profit so I'm not complaining. I'm only investing and and involved in a small level, with a chef and a manager I hired. But it was a wonderful experience arranging stuff from ovens and mixers to signboards and corrugated boxes, with all minor details in between.

Things tend to be cheap in Sri Lanka, and rent isn't really that expensive, so it was not that difficult to start the business.