More than 11 million people travel by air every day. The vast size and velocity of this global market makes it ripe for fraud, which is estimated at about US$1 billion per year, according to the International Air Transport Association. But as they say with the stock market, past performance is no guarantee of future results. Your airline can reduce card fraud with the right approach and tools.
There are actions your company’s fraud team can do right now to reduce financial and operational damage from fraudsters. Here are the top five tactics used by fraudsters and scammers against airlines. Each description includes tips for reducing that type of fraud.
1. Transactional Fraud – Stolen payment cards are frequently used to purchase flights. To avoid scrutiny, many times these itineraries are booked at the last minute – or booked well in advance and then exchanged for a more immediate departure. Solution: Look for last-minute bookings and exchanges, especially those with departure dates or locations that are dramatically different from the original itinerary. Aligning the departure city, payment card-holder location, customer loyalty history and IP address can often reveal fraudulent behavior and transactions.
2. Account Takeover – Many fraudsters hack into loyalty and mileage plan accounts to access accrued miles. Once they breach an account, fraudsters can use the miles for flights and marketplace purchases – or transfer them to a different account to avoid detection. Solution: You must identify and confront account takeovers without creating a negative experience for your customers. With the right tools, suspicious account activity can be automatically flagged and additional authentication measures can be taken without creating unnecessary friction with valid account holders.
3. Loyalty Program Fraud – Loyalty and mileage plan accounts are often established by fraudsters to make fraudulent transactions look more legitimate. In many cases, stolen payment cards are used to purchase miles, which are then used or resold. Solution: Consider limiting or prohibiting new loyalty program members from buying miles as their first transaction. Miles should be earned through actual travel, at least initially, to establish customer legitimacy. It is also important to flag and monitor accounts that transfer miles to other accounts – either frequently or in large quantities.
4. Rewards Abuse – Some fraudsters purchase high-priced tickets to attain points from their payment card issuer, and then cancel the ticket after those points have been used or sold. This creates unnecessary churn, ties up valuable seats and results in lost revenue. Solution: Flag and monitor individuals who cancel and refund tickets more frequently than the average customer. A high volume of cancellations and refunds should be viewed as anomalous behavior and potential fraud.
5. Counterfeit Card Fraud – Sophisticated security for airline websites and call centers is thwarting most traditional fraud attempts. So many fraudsters are going straight to the ticket counter to book flights using a fake payment card. The vulnerability is many ticket counters do not use EMV chip technology, which helps fight counterfeit card fraud. Solution: It is difficult to spot counterfeit card fraud with just a name and card number. Using more data sources for correlation and analytics will make it easier to identify and prevent fraud. Face-to-face transactions should be aligned with e-commerce authentication measures as part of a holistic fraud prevention strategy.
The variety of airline card fraud exploits shows why it’s important to stay nimble in addressing new threats. Keeping your fraud techniques and algorithms tuned for the latest airline industry trends in fraud will help stop card fraud before it hits your company, customers and supply chain.
Mark leads the Accertify business in the JAPA region and has over 17 years experience working in technology and payments. When he’s not traversing the subways of Tokyo or streets of Shanghai, he can often be found where he is most at home - cruising Sydney harbour on his boat.
