Why eCommerce Fraud Is a Problem for the Travel Industry
May 17, 2019 | Merchants | PayKings
Whether fraudsters are scamming free flights with stolen credit card numbers, booking hotel stays to test stolen card numbers’ validity, or falsely claiming fraud after a tour or trip, travel fraud is a big, organized business. And as online and mobile bookings increase in popularity and consumer technologies evolve, the travel industry will continue to be at an increased risk for fraud.
In 2016, airlines and travel accounted for 46 percent of e-commerce fraud attempts, according to Juniper Research, and the industry’s chargeback rate is more than double the typical rate for other industries. The prospect of losses due to fraud, plus the cost of chargeback fees and resulting higher payment-processing fees, has made some travel players wary of going digital — and understandably so. Here are just a few of the unique, and particularly difficult, challenges the industry faces when it comes to e-commerce transactions.
Travel Order Data Is Complex
With so many products in the travel vertical — from airline tickets to hotel reservations to shore excursions — sold in digital form, fraud suddenly becomes much harder to detect. Most e-commerce fraud prevention systems rely on data mismatches on an order to identify fraud, but those mismatches are as likely to identify legitimate customers as they are fraudsters.
In today’s sales, the ticket buyer isn’t always the actual passenger. In fact, it’s common for legitimate consumers to buy tickets for third parties (e.g., parents buying for their children, friends buying for friends, etc.), so the names associated with the transaction commonly don’t match those on the ticket. And with today’s digitally delivered tickets, physical shipping addresses are rarely required, so merchants can’t match shipping and billing addresses to confirm transactions.
For the travel industry, incongruous data is the norm rather than the exception — even for legitimate orders. And that gives merchants less evidence to distinguish authentic transactions from fraudulent ones and makes stopping fraud increasingly difficult.
Transaction Windows Are Longer
Because travel agents must confirm ticket availability before they can approve a booking, merchants in the travel industry frequently experience transaction windows that are longer than those in other e-commerce verticals. Unfortunately for travel merchants, a customer’s credit card funds can go from sufficient to insufficient as the merchant waits for confirmation. If the merchant approves the order too early, the transaction might be left unpaid, leaving the business out the funds and the tickets.
The Timing of Purchases Matters
The amount of time between a customer makes a purchase and uses the tickets also matters when it comes to fraud.
Fraudsters love to make their bookings after 6 p.m. or before 8 a.m. — exactly when a fraud analyst is off duty — and they frequently make their purchases within three days of the actual travel date. The quick turnaround leaves little leeway for a thorough manual review. By the time most travel companies have a chance to thoroughly review the purchase, the fraudsters are likely already at their destination.
But that doesn’t mean all travelers who make reservations well in advance of their trip are honest purchasers. Sometimes, this long lead time gives buyers just enough time to change their mind about their trip or regret the money they spent and file a chargeback on the travel products or services they purchased if they can’t get a refund.
Travel Purchases Often Involve Multiple Transactions
When consumers book flights or other travel services, they often purchase “extras” for the same trip (like advance check-in, seat upgrades or checked luggage) as separate transactions, through different channels, on different dates, and even through different payment methods. These fragmented transactions make it harder for merchants to prevent fraudulent transactions; it also opens up the opportunity for customers to dispute transactions, saying they never made the purchase.
Fraudulent Travel Agents Are Also to Blame
Customers aren’t the only ones guilty of committing fraud. There have also been reports of unsuspecting customers who have paid travel agents for what the customer believes to be a legitimate booking. But once they arrive at their hotel or the airport and are denied entry or boarding, they learn they’re a victim of fraud at the hands of a fake and dishonest agent.
Risk Tolerance Fluctuates
As an airline or a cruise ship nears its departure date and time and finds itself with empty seats or cabins, it’s often more willing to accept risk and approve potentially fraudulent transactions. For the company, the risk is relatively low — after all, the airplane will fly to its destination whether it’s empty or full.
But what these travel companies might not take into account is that fraudsters talk, and word of easy targets spreads fast. Once a fraudster successfully commits fraud against a travel company, they may take to the dark net to share their tips, increasing the volume of attacks.
With the travel industry and consumers enjoying the ease of conducting business online, travel providers have to look no further than their potential revenue and reach of online services to understand the importance of fraud prevention. For the travel vertical, one of the best defenses against fraudsters is a multilayered approach to fraud screening that uses highly trained analysts, algorithm-based tools and advanced artificial intelligence. Used in combination, these strategies can help increase a travel business’s revenue and give them the security they need to grow in an increasingly competitive industry.
Rafael Lourenco is Executive Vice President at ClearSale a card-not-present fraud prevention operation that helps retailers increase sales and eliminate chargebacks before they happen. The company’s proprietary technology and in-house staff of seasoned analysts provide an end-to-end outsourced fraud detection solution for online retailers to achieve industry-high approval rates while virtually eliminating false positives. Follow on twitter at @ClearSaleUS or visit http://clear.sale/.
May 17, 2019 | Merchants | PayKings