Mike Long of Accertify explains how airlines can employ safeguards to prevent them from falling victim to criminal activity on their websites.

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November 2011 - Airline Business

During the past decade, the internet has become a critical channel where airlines can streamline booking, reinforce brands and create a positive customer experience. Unfortunately, while consumers have been quick to take advantage of the convenience, criminals have been just as fast to develop schemes to target these websites, many of which do not yet have adequate safeguards in place to prevent fraudulent transactions, specifically credit-card fraud. 

While advanced fraud-prevention tools can significantly reduce losses and improve customer service and brand reputation, many carriers continue to rely on basic fraud-screening rules offered by their payment service provider. Others are forced to use internal tools to facilitate a manual review process, delivering a simple accept or reject response. Carriers also rely too heavily on card security services, which limit sales to customers who have these cards or live in certain regions, thereby constricting customer-growth opportunities.

SUSPICIOUS ACTIVITIES

In its Airline Fraud Report 2010, Deloitte found “a third of airlines consider fraud to be a significant problem, and one that has increased in the past year”. Fraudulent purchases can have an overwhelming impact on companies’ bottom lines. According to airline business intelligence provider AirlineInformation.org, airlines lost $1.4 billion worldwide to online fraud in 2010. Given this, Deloitte has estimated each airline spends $2.4 million a year to combat fraud. Alarmingly, Deloitte also found “52% of carriers have no system to formally detect and track fraudulent behaviours, and only half of respondents had a formal system to pick up unusual transactions or suspicious activities”.

Traditional fraud mitigation platforms were cumbersome and expensive and at first only online travel retailers and larger airline carriers established anti-fraud programmes. As a result, criminals shifted focus to the path of least resistance and tend to target tier-two carriers that are less likely to have proper safeguards in place. In fact, according to a separate report from Deloitte, Fraud in the Airline Industry, low-cost carriers bear the brunt of external fraud, with 1,000 cases compared with 300 for larger carriers. Importantly, the impact of credit-card fraud is not solely focused on lost revenue, it can also have a detrimental effect on customer service and brand reputation. In Europe, many tier-two carriers have highly labour-intensive fraud prevention strategies, which have a significant cost and high demand on resources and are not as thorough, consistent and successful in fighting fraud. As a result, many of these carriers are turning away good customers to alternative sales channels as they have made it increasingly difficult for customers to purchase tickets on their websites. In particular, this is causing customers who want to buy at short notice or have multiple destinations to turn to carriers with the ability to serve these needs.

The sophisticated services offered by some of today’s risk-management solution providers give carriers a much more robust front-end screening process focused on identifying legitimate and suspicious transactions. Airlines can also benefit from an integrated case management platform that streamlines the entire review and resolution process, making the carrier more effective in its fraud prevention.

COMPREHENSIVE TOOLS

By enabling carriers to identify patterns in fraudulent purchasing to catch and prevent it, technologies such as Accertify’s Interceptas platform are designed to manage a wide variety of payment and other transaction risks across process flows, sales channels and geographic regions, while allowing legitimate customers to speed through the purchasing process without inconvenience, ensuring a positive customer experience. It is imperative for all airline carriers to have comprehensive tools in place to protect against online fraud and create a secure environment for their customers. 

Many tier-one carriers have been diligently implementing strategies but it is vital that tier two carriers follow suit. There are flexible tools and strategies for preventing payment fraud that can significantly lower the direct and indirect costs associated with fraud, including manual review, fraud attempts, fulfilment delays, staffing needs, customer delays, and chargeback penalties and fees. By adopting an effective anti-fraud programme, airlines will be able to increase revenues and positively affect the customer experience and the reputation of their brands.