MANAGING FRAUD ON TRAVEL BOOKINGS

2

The highly competitive travel industry faces a unique set of challenges around payments

acceptance and fraud prevention. The sector is particularly susceptible due to an increasing

number of virtual, remote bookings that offer high-value, low-risk opportunities for

fraudsters to act as intermediaries rather than choosing to travel using the fraudulent

booking themselves.

Whether a merchant is an airline, travel agent, hotel or car hire company, most operators in

the travel industry rely on low-margin transactions and the ability to fill as many customer

spaces as possible, making it critical to strike the right balance between efficiently

processing genuine customer bookings and protecting the company from the risk of fraud.

Despite this, across the sector few sophisticated fraud tools are in use and merchants

rely heavily on manual review processes and card issuer fraud prevention measures such

as address verification (AVS), card verification number (CVN) and 3D Secure. This often

creates inefficient fraud prevention processes, reduces accuracy and acts as a drain on

merchants’ in-house teams. It is no surprise that, for many travel operators, fraud rates can

reach ten times target levels, and many are losing revenue not only to fraudsters, but also by

inadvertently declining good customers.

Here, ACI Worldwide® outlines some of the key fraud management issues facing the travel

industry and provides best-practice tips on how to mitigate them.

TIME TO DEPARTURE

Last minute bookings are a major fraud management

challenge, with fraudsters often making their bookings

as close as possible to the time of travel to improve

their chances of evading detection.

Across ACI’s travel merchants, nearly 80% of the

total volume of chargebacks occur where the time

to departure is less than three days. By contrast,

approximately 4% of chargebacks come from longer

term bookings where the order is processed more

than 60 days in advance.

1TIMING HOTSPOTS

ATTEMPTED FRAUD (CHARGEBACKS) ACROSS TIME TO DEPARTURE

Source: ACI travel merchants, Jan–June 2017

Managing Fraud on Travel Bookings

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EXECUTIVE SUMMARY

3

the travel destination. It is also common for fraudulent

bookings to cover travel from a country of high

economic prosperity to less developed regions.

With last minute bookings also popular with genuine

customers, merchants have a challenge on their hands

to distinguish between good and bad bookings.

For this reason, other trends in each sub-segment

become important in helping to spot the fraudster. For

instance, in hotels, last minute bookings by fraudsters

are often for short stays in desirable locations. For

airlines, these last minute fraudulent bookings are

usually for standard or economy class, to avoid

attracting attention.

BOOKING CHANGES

Fraudsters are also well versed in the advantages

of changing a booking at the last minute. Here, a

fraudster will make a booking well in advance of the

travel date, knowing that this type of purchase looks

low risk to a fraud management team and is less

likely to be challenged. The fraudster will then change

the booking close to the departure time, with the

knowledge that some travel companies do not

re-screen for potential fraud on booking changes.

These booking changes are also often completed

across different channels, which can make the fraud

harder to spot. For instance, it is a common practice

for fraudsters to make their original booking online

and then call a contact center to make the amendment

to the booking, because contact center staff are

generally not trained or targeted to look for fraud. A

lack of data compilation and sharing across channels

also means that the fraudulent activity can be difficult

for merchants and their fraud providers to pick up.

High attempted fraud rates on foreign payment

cards continue to be a common problem for travel

sector merchants, creating particularly difficult fraud

management challenges for merchants looking to

expand internationally. However, there are broader and

more complex location-related trends which all travel

companies must be wary of.

For instance, some travel routes are more frequently

targeted by fraudsters, with locations such as Nigeria,

Egypt, Malaysia, Indonesia, Russia, the Dominican

Republic, Ghana, Brazil and South Africa being some

of the highest risk, as either the departure location or

2LOCATION HOTSPOTS

With effective fraud prevention strategies and

solutions, travel companies can mitigate these

areas of risk, successfully increase revenues and

open up new routes and payment channels. To find

the right balance, ACI analysts offer the following

recommendations:

Move beyond 3D Secure: While the liability shift

offered by fully authenticated 3D Secure (3DS)

transactions is of great benefit to travel companies, it

is important to use additional measures for a couple of

reasons:

• The rise in dynamic 3DS means consumers are

having to enter their passwords less frequently,

which is increasing the percentage of fraud that is

fully authenticated via 3DS.

• Fraud which passes through 3DS still counts towards

a merchant’s overall fraud level with the card

schemes, making it vital to monitor and screen these

transactions to avoid scheme penalties.

• Fraudulent 3DS bookings are a source of fraud

intelligence — merchants must capture this data to

build a more holistic picture and stop associated

fraud.

Practice positive profiling: Wherever possible, it is

valuable to proactively collect, collate and analyze

as much customer profile information as possible,

including passenger name reference (PNR) data, email,

address information, associated payments information,

customer preferences and booking history. This allows

merchants to build a positive picture of their genuine

customers and ensure their bookings are processed

seamlessly — helping to support loyalty and increased

sales.

Use all available data: Fraud rules and predictive

models must be built on a thorough understanding of

all available internal and external data. Collaboration

and sharing fraud intelligence among travel sector

companies and other players in the payments chain

3BEST-PRACTICE FRAUD PREVENTION FOR TRAVEL COMPANIES

4

can enable merchants to get a fuller picture of

customer profiles and fraud trends — supporting

better informed fraud strategies and effective action

to adjust rules, block fraudsters and prevent further

losses.

Tailor fraud strategies: Using fraud and customer

data to create tailored but flexible rules allows fraud

prevention strategies to be targeted and effective,

reducing false positives and the impact on genuine

customers, while keeping fraud to a minimum. Fraud

solutions must be tailored to payment type, customer

and card issuer location, timing of booking, etc. and

include customer history and profiling information.

They also must be adapted in line with seasonal

changes and promotions, emerging trends, merchant

KPIs and market developments.

Prioritize high-risk and short-notice bookings:

Real-time screening of transactions is essential for

timely action against fraud and to ensure genuine

customers receive smooth service. Automated

decisioning plays an important role in this process —

particularly for merchants who can’t operate a 24/7

fraud management team. Implementing different rule

strategies for short-notice bookings made outside of

office hours can help manage the potential impact

of fraud and optimize use of internal resources by

automatically releasing or canceling orders. For those

bookings which can be manually reviewed, high

priority cases need to be prioritized in the process to

ensure minimal disruption.

Screen and re-screen: Real-time screening of

transactions is essential, but not sufficient. Fraud

and customer data is constantly changing and

what doesn’t look like fraud at the time of booking,

may look different once new fraud data is added

later. Retrospective screening can help to build a

more accurate, detailed profile of transactions and

associated fraud. In this way, bookings that are initially

accepted and later identified as suspect or confirmed

fraud could still be recovered — by canceling bookings

before the travel date, or, where the travel date has

already passed, initiating refunds and preventing

associated bookings from being processed.

Employ comprehensive monitoring and reporting

processes: Quick and accurate reporting is crucial in

the fight against fraud, since small increases in fraud

can have a huge impact, eating into already small

margins. Effective and timely reporting allows for

new and emerging fraud trends to be picked up and

fraudsters to be closed down quickly. The ability to use

business intelligence tools and analytics to monitor

transactions and interrogate data in a timely way can

also help to produce fast, actionable intelligence which

can heighten performance and support a continuous

improvement process.

5

ACI Worldwide, the Universal Payments®

(UP®) company, powers electronic

payments for more than 5,100 organizations

around the world. More than 1,000 of

the largest financial institutions and

intermediaries, as well as thousands of

global merchants, rely on ACI® to execute

$14 trillion each day in payments and

securities. In addition, myriad organizations

utilize our electronic bill presentment

and payment services. Through our

comprehensive suite of software solutions

delivered on customers’ premises or

through ACI’s private cloud, we provide

real-time, immediate payments capabilities

and enable the industry’s most complete

omni-channel payments experience.

Americas +1 402 390 7600 Asia Pacific +65 6334 4843 Europe, Middle East, Africa +44 (0) 1923 816393

© Copyright ACI Worldwide, Inc. 2017 ACI, ACI Worldwide, ACI Payment Systems, the ACI logo, ACI Universal Payments, UP, the UP logo, ReD, PAY.ON and all ACI product names are trademarks or registered trademarks of ACI Worldwide, Inc., or one of its subsidiaries, in the United States, other countries or both. Other parties’ trademarks referenced are the property of their respective owners.

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