Fraudsters Nab $1.4 billion from airlines
May 18, 2011, Mountain View, Ca. - Survey findings released today by CyberSource Corporation, a Visa company (NYSE: V) show that while airlines are gaining in their war against fraud, much work remains to be done. Airlines reported a loss of about $1.4 billion USD to online payment fraud in 2010.
May 18, 2011 By Carey Fredericks
Dr. Akif Khan, CyberSource's Director, Products and Services said: "The good news is that in terms of fraud loss rates, 2010 results showed a 31 percent improvement over 2008. Clearly, airlines have not only recognized the challenge but have made timely adjustments to it." According to the survey, changes made by airlines in the last two years include higher use of fraud detection tools in automated screening (7.3 on average, compared to 5.8 in 2008), along with rejecting more bookings due to suspicion of payment fraud
Selected survey findings
–Experience counts: airlines with less than three years of online selling experience have higher fraud loss rates, manual review rates, and higher reject rates than their more experienced competitors. For example, airlines with more than ten years of online selling experience manually review 15 percent of their bookings; those with fewer than three years review 53 percent.
–Airlines may be ignoring a powerful anti-fraud tool: Only three percent of airlines surveyed used public record searches to validate bookings. But those that used the tool felt it was one of their most effective anti-fraud measures.(Public record searches are not universally available). Device fingerprinting and third-party fraud scoring models were among the top tools merchants cited as considerations for future use.
–Automated review requirements will accelerate: According to the International Air Transport Association, passenger revenue will increase by 7.3 percent in 2011, but nearly 90 percent of airlines surveyed say their manual review staff levels will remain the same. Automation will have to make up the difference.
"Fraudsters will move to the weakest link in the chain," said Christopher Staab, Managing Partner of Airline Information. "And that weak link is most likely going to be the airlines unfamiliar with how sophisticated fraud can be perpetrated with online ticketing sales. That's why this type of data is so critical for the airline industry worldwide. There are solutions out there– airlines need to implement them."
A typical fraud scenario in the airline industry plays out as follows:
Fraudster illegally obtains credit card data;
Fraudster obtains name, address, and other appropriate information for a genuine customer interested in buying "discount" tickets;
Fraudster buys the ticket in the innocent person's name, using the stolen credit card number;
Fraudster delivers ticket to the customer and receives payment in cash.