Fraud in the travel industry

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How do you deliver outstanding experiences without inviting fraud? In the travel industry, online bookings are a hot target for fraudsters.

Rising competition, small margins

The overall volume of fraud in the travel industry is increasing across different travel products, but many companies are facing a small margin – particularly in the airline and OTA sectors. High-ticket value, with a low margin, creates a higher business risk. And “inventory” – which could have gone to a legitimate traveler – can’t be recovered once it’s lost to fraud.

Moving into new markets

The incredible rise of online travel has introduced great opportunities for businesses to expand into new markets. However, every new market has a different risk profile. Travel companies need to adapt their tools, as well as potentially hire new people with specialized knowledge of these markets.

Increasing product offerings

Travel companies are under pressure to grow and expand. Just look at Expedia’s 2015 acquisition of Homeaway, which many say is now helping Expedia close in on Airbnb in the home-sharing market. You may start out offering a single product, like hotels. But then you expand into vacation rentals, insurance, activities, airport transportation, etc. Each product will also have a unique risk profile, which needs to be accounted for in any fraud prevention models.

Collecting information while keeping the experience simple

For many travel products – like airline tickets – you need to collect a lot of information. However, thanks to Amazon and other digital pioneers, customers are growing more accustomed to a streamlined buying experience. If they face too much friction, they’ll turn to one of your competitors instead. How do you keep the experience simple and intuitive, without increasing risk?

Monitoring mobile bookings

Some 40% of digital travel sales are expected to be completed on mobile in 2017, according to stats from eMarketer. And Google research found that 31% of leisure travelers and 53% of business travelers have booked travel on a smartphone. Companies have to be prepared for both legitimate and fraudulent mobile bookings headed their way. When it comes to fighting fraud, mobile data is fairly unique – you can get extra data points like mobile carrier, device type, and the pressure someone uses to tap that help pinpoint fraud.

Last-minute travel is growing

The window of time between booking and traveling is shrinking for all travelers. One-third of millennials make travel plans at the last minute, and 72% of mobile hotel bookings are made within one day of a stay. This change in traveler behavior means real-time decisions are critical to your ability to stay competitive. In many cases, there’s just no time to manually review risky orders and logins. Meanwhile, fraudsters take advantage of last-minute bookings to evade detection. Research has found that day-of hotel reservations are 4.3 times more likely to be fraudulent.

Flexible bookings/changing travel plans

Customer experience is high on travel companies’ list of priorities – and that means providing flexibility and convenience. However, fraudsters often take advantage of the ability to change their booking at the last minute. For example, they may buy a ticket that appears low-risk ahead of time, then change it at the last minute. Not all travel companies rescreen for fraud when a booking changes.

Multiple types of fraud

Not only do travel companies deal with payment fraud in the form of stolen credit cards, but they also face fake accounts, content abuse (if they incorporate reviews and other user-generated content), and account takeover (loyalty fraud). The teams responsible for managing these different types of abuse may be located in different departments, using disparate tools, which makes it challenging to take a unified approach to managing risk.

SOURCE: Sift Science

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