Tech Helps Airlines Keep Card Scammers Grounded

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American Banker, August 31, 2011

Airlines are investing in technology improve security in an area TSA checkpoints don't cover: credit card fraud.

Scammers who buy tickets with stolen card accounts use the same tactics they do when trying to make fraudulent transactions at banks, such as making purchases at specific times that they think makes them harder to spot.

"They tend to buy airline tickets at the last minute, so two days before a flight is when most of the fraud attempts occur," says Jeff Liesendahl, chief executive of the security vendor Accertify Inc. "But when the criminals figure … out" that the airlines know their methods, "they will try something else."

This turns ticket-purchasing fraud into the same "cat-and-mouse" game that banks play when they try to thwart credit card scammers, he says.

Accertify, an Itasca, Ill., unit of American Express Co., works with companies such as Frontier Airlines, which signed a deal Aug. 25 to use Interceptas, Accertify's fraud-detection tool. This tool will compile customer data that the Denver airline provides and combine it with information based on the particulars of the website transaction to help assess potential risk.

"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?"

If Interceptas flags something as suspicious after assessing all of the transaction data, Accertify will alert Frontier and follow the 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.

Attempts at "friendly fraud," when the cardholder simply denies having made the purchase, and "hostile fraud," when crooks use stolen credit cards, put airlines on constant alert, says Julie Conroy McNelley, a senior risk and fraud analyst at Aite Group.

"It's definitely widespread online and at the call centers," she says. "First credit card fraud was a problem at banks, then the airlines [were] the next frontier, no pun intended. But the airlines are on board now, and their fraud protections are working."

After the airline company has protected its online and call-center purchases with fraud screening, the criminal attempts drop dramatically, says Anne Hiller, senior vice president for marketing at the fraud-protection services company 41st Parameter Inc.

"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 says its technology avoids needlessly flagging irregular travel plans as potential fraud. 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 says. "The customer address is important, and if a transaction is suddenly coming from a hospital or nursing home we get suspicious."