A global study of airlines has found that they lost about $1.4 billion last year to online payment fraud, amounting to 0.9% of total online airline sales, according to a study released today by online payment security technology and services provider CyberSource Corp., a unit of Visa Inc., in association with Airline Information, a publisher of airline industry information.
The good news for airlines is that the study also shows a drop in payment fraud on airline e-commerce sites from 2008, the last time the study was conducted. Since that study, online payment fraud among airlines dropped 17.6% in terms of dollars, to $1.4 billion from $1.7 billion, resulting in a 30.8% drop in the fraud rate to 0.9% of online sales from 1.3%.
The study, “Airline Online Fraud Report: Online Payment Fraud Practices and Benchmarks,” is based on a survey of 192 executives whose companies represent an estimated 40% of total worldwide online sales for airlines. Online sales for airlines participating in the study totaled $62 billion in 2010; total annual sales for each airline ranged from $500 million to over $10 billion.
The study notes that online payment fraud rates are highest among airlines that have been selling tickets online for less than three years. Airlines in this group had a 2010 online payment fraud rate of 1.7%, and those with three to four years of experience had a fraud rate of 1.4%. By comparison, airlines with more than 10 years of experience in online sales had a 2010 online fraud rate of 0.5%.
The study also notes that the online payment fraud rate was lower among low-cost airlines (0.4%), compared to their higher-priced competition (1.2%).
To detect online fraud, airlines use a number of services and methods; the following list shows the percent of airlines citing the fraud-detection services and methods they find most effective.
Validation services:
∙ Verified by Visa, 60%
∙ Paid-for public records services, 50%
∙ MasterCard SecureCode, 46%
∙ Card verification number, 24%
∙ Credit history check, 16%
∙ Telephone number verification, 16%
∙ Address verification service, 12%
∙ Postal address validation services, 5%
∙ Validation using social networking sites, 0%
∙ Out-of-wallet or in-wallet challenge/response systems 0%
Single airline purchase history:
∙ Negative lists, in-house, 49%
∙ Fraud-scoring model, company specific, 49%
∙ Order velocity monitoring, 25%
∙ Positive lists, 19%
∙ Customer order/frequent flyer history, 10%
Purchase device tracking:
∙ IP geolocation information, 26 %
∙ Device fingerprinting, 25%
Multi-airline purchase history:
∙ Shared negative lists, 44%
∙ Fraud-scoring model, third party, 34%
Following is a list of fraud-detection tools and services and the percent of airlines planning to adopt them:
Validation services:
∙ MasterCard SecureCode, 13%
∙ Verified by Visa, 12%
∙ Address verification service, 12%
∙ Telephone number verification, 9%
∙ Postal address validation services, 8%
∙ Credit history check, 7%
∙ Paid-for public records services, 5%
∙ Validation using social networking sites, 5%
∙ Card verification number, 3%
∙ Out-of-wallet or in-wallet challenge/response systems 0%
Single airline purchase history:
∙ Customer order/frequent flyer history, 13%
∙ Fraud-scoring model, company specific, 9%
∙ Order velocity monitoring, 8%
∙ Positive lists, 5%
∙ Negative lists, in-house, 3%
Purchase device tracking:
∙ Device fingerprinting, 20%
∙ IP geolocation information, 13%
Multi-airline purchase history:
∙ Fraud-scoring model, third party, 14%
∙ Shared negative lists, 12%
The study also notes that 31% of airlines have no plans to adopt new fraud-detection tools or services.
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