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.
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