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Shining light on credit card fraud in the indirect channel for airlines

Anna Almqvist

Head of Commercial, Travel Payments, Amadeus IT Group

Credit card fraud is a worldwide problem and the travel industry offers fertile ground for criminals. According to a recent CyberSource study - 3.4% of airline bookings are rejected or cancelled due to the suspicion of credit card fraud. More and more airlines are taking action and protecting their direct sales channels (e.g. website, call centres) against fraud. However, greater vigilance is a doubled edged sword.

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Such measures may push fraud into other channels. As airlines clamp down on fraud on their direct sales, fraudsters move to less protected channels. It is estimated that credit card fraud represents between 1% and 2% of an airline’s revenue in the indirect channel. This presents a $2.4 – 4.8 billion dollar problem for airlines.

The indirect channel is a much more complex environment than the direct and, without a solution to monitor transactions for potential fraud, airlines have little idea about the size and type of fraud which is conducted; in this sense it is like a black box. The intricate nature of indirect sales and the different stakeholders involved from booking to settlement adds a level of complexity and opacity for airlines and creates opportunities for fraudsters.

Visa and MasterCard monitor all merchant chargeback activity on a monthly basis and alert acquirers when the chargeback-to-transaction ratios indicates chargeback levels > 1%. Corrective actions will depend on the acquirer and merchant characteristics as well as on the agreement between them but in the worst case may include cancelling the merchant’s account.

What can you do about it? Here are a few tips to stop fraudulent transactions at the point of sale before they occur;

  • Use a real-time fraud screening integrated in the GDS booking and ticketing flow
  • Use all data available to identify good and bad customers
  • Track and continuously monitor the fraud chargeback activity
  • Work closely with your travel agency partners to reduce chargeback levels

Amadeus Travel Payments is already helping airlines with our Fraud Management solution for direct sales channels. Now we’ve gone one step further, enabling airlines to apply the same fraud checks on the bookings made via travel agencies on behalf of the airline.

Our end to end solution makes reducing fraud levels and maximising sales conversion easy. Thanks to our unique position, we can use an unrivalled sum of data in order to contextualise the sale and easily identify good and bad customers at the time of booking. Fully integrated into the booking and ticketing flow, we send a fraud screening request before even requesting an authorisation. This is an essential step in order to save costs by being able to stop a ticket from being issued when payment is detected as fraudulent.

For bookings that require a further review, airlines are able to make an informed decision based on a large amount of information and either accept or deny that booking. If an airline decides to deny the booking and the ticket has been already issued, then we’re able to take automatic actions and, for example, void the ticket, therefore maximising effectiveness and reducing manual workloads.

Fraudsters do not differentiate between direct or indirect sales channels, moving from one channel to another until fraud is successful and using the communication gaps that might exist between the travel agency and the airlines to perform changes on a valid booking in such a way that it becomes a fraudulent one.

Only by protecting all channels, can airlines have peace of mind independent of the country or channel that will be used to make bookings.