Airlines hit by $1.4BN online fraud issue

Airlines lost an estimated US$1.4 billion in online fraud last year according to new research.

The study from online payment specialist CyberSource showed airlines could safeguard themselves against much of the fraud as well as claw back some of the lost revenue by implementing a few simple measures.

According to the Airline Fraud Report the sector is wasting time and effort on manually checking potentially fraudulent bookings, with 61% on average eventually being accepted.

The report also shows airlines could claim almost a third of the revenue lost through charge-backs from credit card companies.

Akif Khan, head of client and technical services at CyberSource, said online fraud was increasing across all sectors although not in huge percentages.

“What you have to bear in mind is the amount of money these companies are making online is going up so the amount of money they are losing is increasing.”

Khan said airlines could stem the losses from online fraud in a number of ways including a detailed look at how much it is costing the business, increased automation and analysis of where the fraud is occurring to detect any patterns.

“There are a lot of areas that are attributable to the cost of fraud and one of the trends we have seen is the amount people are spending on manually reviewing bookings is creeping up. The cost of reviewing bookings is the biggest drain on resources when putting a fraud strategy in place.”

Khan also said there was a massive discrepancy in the way airlines treat charge-backs with some companies disputing every single claim form the credit card companies.

“On average airlines are recovering 32% of the revenue that would have been lost to charge-backs.”

The Airline Fraud Report also shows huge variations in online fraud activity in different classes with economy being more of a target than the premium tickets.

The length of online experience from carrier to carrier also plays a part according to CyberSource with those that have been trading on the internet showing lower fraud rates than newcomers.

Khan admitted that the travel sector was more of a target than other sectors for a number of reasons including the prevalence of e-ticketing.

“In travel you’re not shipping physical goods and with e-tickets issued online it is easier to remain anonymous so it is an easier target and because of the lower margins it feels the pain more.

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