ARC partnered with Phocuswright, Cybersource and IATA to release the report: “Benchmark Study: 2018 Global Airline Online Fraud Management.” This in-depth study examines fraud prevention practices, fraud payment trends and the future of fraud management across the global airline industry.
Participants in this study consisted of 112 qualified respondents who have a background in payment and fraud management at a commercial passenger airline or independent airline loyalty program.
Fraud Payment Trends Disrupting Airline Online Booking
Today’s global airline community is seeing an increased demand to book travel experiences online. According to this report, airline websites represent 31 percent of all global sales, while travel agencies, tour operators and consolidators represent a healthy share of the bookings at 27 percent. With this surge of travel bookings through various online channels, trends show more responsibility for payment acceptance and fraud management is naturally falling to airlines.
"All airlines in the study identified an increase in mobile bookings coupled with a rise in fraud incidences. "
Many online booking tools and payment methods continue to influence fraud trends worldwide. With the wave of digital natives adding to the teeming interest to book travel experiences online and a plethora of new ways to accept alternative forms of payment (AFOP), such as mobile payments and online wallets, all airlines in the study identified an increase in mobile bookings coupled with a rise in fraud incidences.
Despite the growing popularity of alternative payment methods, the use of credit cards and debit cards remains on top and still makes up 99 percent of direct sales for all airlines. Additionally, AFOPs continue to have the highest “above average” fraud incidences for the airline community.
The global airline payment landscape continues to evolve as new opportunities become available to consumers, and airlines find themselves more at risk than ever before. Therefore, “mobile-specific fraud management resources will become increasingly important” to mitigate this issue.
Fraud Prevention and Detection Practices Today
With the threat of fraud prevalent across all booking channels and payment types, validation services have become a way of life for prevention. Findings in this report concluded that the majority of surveyed airlines use a variety of verification tools, technologies and services to detect fraud before it happens. The top three verification services included credit verification numbers (CVNs), used by 78 percent of the airlines; payer authentication (i.e., 3D Secure), used by 68 percent of the airlines; and Address Verification System (AVS) checks, used by 52 percent of the airlines in this report.
Some of the newer forms of validation services, such as biometric indicators like digital fingerprinting and facial or voice recognition, were cited in use by 4 percent of the airlines in this study, while another 21 percent have expressed plans to explore the use of biometric indicators in the near future.
"The majority of surveyed airlines use a variety of verification tools, technologies and services to detect fraud before it happens."
Manual review is a process that requires an employee to manually authenticate the validity of the purchase. Although manual review rates continue to decline, it still remains an important part of the fraud management process. The airlines indicated in this report that 18 percent of bookings require a manual review — a decline of 9 percent since 2014.
Some of the recent trends in fraud detection show that loyalty programs have been a prime target. This report found that 60 percent of the airlines say that the most common type of loyalty fraud is points/miles purchased with a stolen credit card. Additionally, 52 percent say that loyalty account theft is the second most common fraud incident.
Blockchain and conversational commerce are becoming part of a larger discussion around positive ways to reduce future fraud. While both concepts are still in the early phases of implementation, the report stated that 22 percent of the airlines say that they are using, testing, planning to implement or research blockchain technologies, while another 39 percent is either researching or active in conversational channels already.
The Future of Fraud Management
"Twenty-one percent [of airlines surveyed] have expressed plans to explore the use of biometric indicators in the near future."
The future of fraud management remains to be fully seen. The allocation of fraud resources, the use of emerging technology (e.g., artificial intelligence) and the adoption of new techniques and processes will continue to transform the fraud management industry.
While many innovative solutions have enhanced fraud management practices in the global airline community, a lot of work remains. According to the report, “a significant number of airlines indicated they do not know or do not track key metrics (i.e., revenue loss, bookings rejected or canceled, chargeback rates, manual review rates and total cost of managing fraud).” Coupled with these existing issues, the airlines expressed a range of other fraud management challenges from “lack of internal resources to difficulty in keeping up with the latest fraud management technologies to outlining the fraud priorities and streamlining the workflow to help improve fraud management efficiency.”
However, airlines are not alone in the fight against fraud — many industries are facing similar challenges to protect their businesses from fraud. In a “mobile-first, data-driven world,” it is essential that “technology platforms and organizational structures that focus on [airline] fraud” evolve with the industry in order to remain abreast of fraudster tactics as they become increasingly advanced.
To learn more about the 2018 global airline online fraud management trends and practices, download a free copy of the report now.