The past decade has witnessed a spectacular rise in the travel industry’s online and mobile commerce. As in other businesses, going digital—embracing newer channels and technologies—has enabled the travel industry to grow quickly, create more value, and bolster customer experience. However, this rapid expansion has come at a price, making the travel industry ripe for fraud.
New channels breed new vulnerabilities and create dozens of opportunities for scammers. According to industry reports, online bookings have the highest incidence of fraud by channel.
The fraud rate by channel, as observed, is only a little higher for online versus over the phone. As majority of people now use mobile phones to access the internet, more and more bookings are now done via mobile devices. Evidently, online bookings are expected to rise, but so are more sophisticated forms of fraud.
A unique set of areas and activities contributes to breed scams in the travel industry. Some of these top fraud challenges include:
Shrewd fraudsters keep looking for newer, more advanced ways to exploit user data and travel businesses online. Airlines are experiencing an average fraud attack rate of 1-3%. And, because of outdated fraud prevention measures, these airlines are rejecting 8% to 25% of good orders, as per a study by Centre for Aviation.
The following examples show scams that are mushrooming among travel companies and consumers around the world every day:
A fraudster impersonates a genuine user in an attempt to misuse her personal details. Stolen information, such as credit-card numbers, is used to book online tickets and hotel rooms. Additionally, fraudsters often sell stolen identities to underground cybercriminals.
Consumers spend huge sums of money making online bookings, using their credit/debit card information. Such transactions involve heavy investment from both the merchant and consumer. For fraudsters, this is a big opportunity to book flights or hotel rooms using stolen credit card information, with no intent to honor the payment. Adding to the nonpayment losses is the heavy cost of fighting chargebacks—a fight agencies often lose. When this happens, the merchant gets debited for the card charge as well as paying a chargeback fee.
The mobile revolution has brought with it a whole new set of data points to be carefully managed and protected. Fraudsters usually target mobile travel services that don’t require strict identity verification, such as travel company loyalty clubs and memberships. However, with appropriate security measures in place, mobile transactions are at least as secure as other online transactions.
Fraudsters have been known to attack frequent flyers by stealing miles from good user accounts. They do this by often hacking into legitimate user accounts—typically those that have weak login credentials. These thefts damage the company’s reputation and destroy customer trust.
Rule-based systems are still widely relied on to prevent fraud, but they often come up short in battling more advanced crimes. Leading industry players who want to foolproof the future of the travel business are switching to smarter solutions that use machine learning. Unlike traditional rule-based systems, machine learning is proactive, provides more accuracy at scale, and enables real-time decision making.
At Simility, for example, machine learning fights loyalty fraud by using device intelligence technology combined with user-behavior pattern analysis. To see how we are fighting fraud in the travel industry, simply contact us or schedule a demo for a product walk through.
Note: This blog post was originally published here on Simility.com