Fighting Off 3.5%
La Agencia De Viajes, August 29, 2011, Part 2
FACT 80% of all airline companies still do manual reviews of credit card operations to prevent fraud.
Among other events, the recently held Airline & Travel Payments Summit Latin America (ATPS) featured a panel presentation by a travel company. The invitation was initially extended to Aviabue, which considered that, due to the topics to be discussed, it was appropriate to invite a company like TIJE, represented by Managing Director Ricardo Guerrero. The businessman took part in the panel entitled “Fraud control in airline companies and travel agencies in Latin America.” TIJE was selected for its experience: 83% of its 2010 transactions and 84% of the sales registered during the first semester of 2011 were credit operations. The company also has extensive experience with Credit Card Charge Forms (CCCF). “In our day-to-day work, we've identified three different fraud techniques: credit card duplication, credit cards reported as stolen and rejected credit cards,” explains Guerrero. The two last types fall within the category of “friendly fraud.”
Another renowned expert who participated in the ATPS event was Jan-Jaap Kramer, of Telchar Airline Fraud Consultancy. Kramer explained fraudulent transactions very thoroughly and asserted that fraud is usually an “organized and mafia-like crime.” So called “friendly fraud” is not considered as serious, and it is limited to dishonest consumer practices only.
Epigraph: Max Mierscheid — Lufthansa's Senior Manager of Payment and Fraud — Eldred García, and Ricardo Guerrero.
“The emergence of fraudulent transactions has forced us to take action to prevent and fight fraud. The first is a letter of responsibility to be used when the card identity does not match the traveler's identity. The letter must be signed by the cardholder in order to give his express consent,” says Guerrero. The same procedure, the signing of a letter of responsibility, is applied when an identity mismatch is brought forward by a travel agency. “If the credit card belongs to a relative of the traveler, we ask the customer for proof of kin,” he adds. According to Guerrero, those measures proved to be effective and managed to diminish fraud rate.
THE WEAKEST LINK
Before finishing his presentation, Kramer explained that, with airlines improving their fraud prevention systems, travel agencies are now the weakest link in the chain and are frequent victims of fraud. “We should adopt a collaborative approach and work together on defining policies and strategies,” he suggested, and Guerrero shares his view. “When a ticket sold by a travel agency is caught in a fraudulent operation, the agency has to bear the burden and cover all the costs. Companies don't apply supportive procedures, and neither does the BSP,” he adds.
The Managing Director of TIJE also pointed out that travel agencies face the “high costs associated with credit card operations. It adds almost an extra 3.5%, which is later subject to taxes applicable to credit and debit and amounts to another 1.2%.”
TIJE was selected for its experience: 83% of its 2010 transactions and 84% of the sales registered during the first semester of 2011 were credit operations.
IS THERE A FRAUD PROLIFE?
Is it possible to recognize fraudulent transactions at first sight? It would seem not. However, research and case studies have proven that certain pieces of information show a pattern. For example, in 55% of the cases, the names of the travelers did not match the name of the cardholder. Also, 48% of the time, the reservations were for just one passenger. 53% of the operations were completed less than 12 hours prior to departure, while 42% were completed from 12 to 23 hours before. Finally, 56% of the transactions were one-way only.
SECOND CASE STUDY: ACCERTIFY
“Most clients want the same thing: to leverage the information available to them in order to prevent fraud. That implies using all the data to make micro decisions,” observes Accertify's Eldred García (photo), Senior Vice President Strategic Development and Alliances in Latin America. Accertify specializes in fraud and has been recently hired by Despegar.com.
“We have tools that allow us to distribute that information regardless of format, quantity and type. Upon accessing the information of a transaction, we can make an informed decision, which helps prevent fraud and increase sales,” he mentions.
“In Latin America, e-commerce grows more than 50% each year. And fraudsters profit from this booming market. In order to expand, some companies adopt weak formats and policies, such as completing operations without ever seeing the cardholder personally,” concludes García.
FIRST CASE STUDY: ADYEN
“Thanks to Adyen's services, we have adopted the newest trend in market transactions: online payment,” says Gonzalo García Casamayor, LAN's Administration and Finance Manager. More specifically, deploying a new online payment system allowed the company to increase sales by 20% in that channel. In an interview with La Agencia de Viajes, Jean Christian Mies (photo), Adyen's Senior Vice President for Latin America, explained that the main goal of Adyen is “helping businesses to improve their e-commerce performances by simplifying their payment methods.” According to Miles, Adyen offers several advantages. “Our platform is extremely stable and so the success rate is higher, because there are no mistakes. Plus, as far as payment methods are concerned, we include the most relevant methods in each market and evaluate their particular characteristics on a case-by-case basis. Since we are a global company, we can offer up to 75 payment methods and we have established very strong and solid relationships with banks and credit cards. Also, the graphic interface of our own customizable tool is very user-friendly, which adds to our high level of efficiency at preventing fraud.” Adyen will soon branch out to Latin America. “We want to become the main provider of global payment services in the region,” announced Mies.