Airlines lose US$1.4 billion through fraud
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A survey has found that airlines worldwide lost of about US$1.4 billion last year through online payment fraud in 2010. Results released by US-based CyberSource Corporation, a subsidiary of Visa, showed that while airlines are gaining in their war against fraud, with losses narrowing compared to previous years, much work remains to be done.
Dr Akif Khan, CyberSource’s Director of Products & 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 recognised 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.
One of the key findings of the report was that online sales experience is important. Airlines with less than three years of online selling experience were found to have higher fraud loss rates, manual review rates, and higher reject rates than their more experienced competitors. For example, airlines with more than 10 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, according to CyberSource. 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. Device fingerprinting and third-party fraud scoring models were among the top tools merchants cited as considerations for future use.
The report also leads to the expectation that automated review requirements will accelerate. According to the International Air Transport Association (IATA), passenger revenue will increase by 7.3 percent in 2011, but nearly 90 percent of airlines surveyed said 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, CyberSource’s 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.”
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