Airline Card-Fraud Detection Becoming Necessary For Smaller Companies, Experts Say

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PaymentSource, August 29, 2011

An agreement in which Accertify Inc. will provide credit card fraud protection for Frontier Airlines illustrates how non-major airlines are boosting security as criminals shift their attention to them when major airlines thwart their attempts, fraud-prevention experts say.

Accertify, an Itasca, Ill.-based online fraud-prevention company, signed an agreement Aug. 25 to provide its Interceptas risk-management program to Denver-based Frontier for online payment-fraud detection and resolution.

The fraud-detection tool will compile customer data Frontier provides and information based on the particulars of the website transaction to help assess potential risk, Accertify CEO Jeff Liesendahl tells PaymentsSource.

“Frontier Airlines knows a lot about its customers as to whether they are frequent fliers, where they tend to go, where they tend to leave from,” Liesendahl says. “The fraud tool detects where the Web transaction took place. Did it really take place in Chicago, or did it take place somewhere in Russia?”

Many layers of data are assessed during the Interceptas process, but Accertify will not describe those publicly so criminals can develop ways to avoid detection, Liesendahl says.

If Interceptas flags something as suspicious after assessing all of the transaction data, Accertify will alert Frontier and follow whatever procedure the airline has in place for questioning or denying transactions, Liesendahl says.

Assessing all of the data can be a daunting task because of the various forms of fraud occurring with airline ticket purchases, one observer says.

Julie Conroy McNelley, a senior risk and fraud analyst at Boston-based Aite Consulting Group, believes attempts at “friendly fraud,” when the cardholder simply denies he made the purchase, and “hostile fraud,” when crooks use stolen credit cards, puts airlines on constant alert.

“It’s definitely widespread online and at the call centers,” McNelley tells PaymentsSource. “First credit card fraud was a problem at banks, then the airlines was the next frontier–no pun intended. But the airlines are on board now, and their fraud protections are working.”

Anne Hiller, senior vice president for marketing for Scottsdale, Ariz.-based fraud-protection services company 41st Parameter Inc., agrees the airlines are better protected than just a few years ago.

After the airline company has protected its online and call-center purchases with fraud screening, the criminal attempts drop dramatically, Hiller tells PaymentsSource.

“The major carriers have solved the problem, so the crooks go to that second tier, which includes Frontier Airlines. So it’s important protection for them,” she says.

Accertify often will engage in an ongoing “cat-and-mouse” game with criminals who commit credit card fraud, Liesendahl says. “They tend to buy airline tickets at the last minute, so two days before a flight is when most of the fraud attempts occur,” he says. “But when the criminals figure that out, they will try something else.”

41st Parameter’s best customers may appear the same as fraudsters transacting online because they book flights late and prefer premium seating. But all of the other data collected by fraud-prevention tools help signal inconsistencies, Hiller says.

However, looks can be deceiving until the fraud-detection system digs a little deeper.

A regular customer who is flying to Europe for the first time is not automatically considered a potential “bad guy” by the fraud-detection system, Liesendahl says.

“We spend a lot of time doing this kind of work, so the data about the customer is very helpful and helps us decide if it is a bad credit card,” Liesendahl adds. “The customer address is important, and if a transaction is suddenly coming from a hospital or nursing home we get suspicious.”

Joe Allman, Frontier vice president and controller, believes the Accertify agreement will improve overall customer service.

“Not only does Accertify offer a proven risk-management [service] that will help us prevent fraudulent transactions, the company will enable our reservation agents to focus on booking reservations and streamlining the purchasing process,” Allman stated in a company press release.

Accertify Inc., a subsidiary of New York-based American Express Co., also has developed programs to help merchants in charge-back management.