The Fifth Identiq Member Summit: Network Innovation and Expansion
New Twists in Travel Fraud
Economic uncertainty, pandemic-related impact on shopping behaviors, supply chains, geopolitical shifts and more… There’s no shortage of reasons to expect changes in e-commerce, and in fraud prevention.
The travel industry is on the front lines when it comes to facing the changes headed towards fraud and fraud prevention in the coming months. Every industry will be affected by the changes in the wider world, but a number of those changes impact the travel industry particularly heavily, which is why in this blog post we’ll consider the shifts through the lens of travel.
Fraud fighters and payments professionals working in travel need to take extra thought to protect their companies now, through the summer, and for the rest of the year. Because no one knows what the rest of the year is going to look like - but it’s not going to be smooth.
Change is in the Air - Again
March 2020 disrupted the reliable flow and evolution of e-commerce, and for many industries, the sense of dynamic stability that they remember from before Covid-19 has just never come back. Customer behaviors, once relatively predictable, became subject to sudden, swift changes that businesses simply had to adapt to as best they could - and then adapt again, and again, and again.
Many travel companies have cross-border business; that’s inherent to the nature of the industry. It also made grappling with these shifts especially challenging, from borders closing to differing legal requirements, to mask mandates or the lack of them, to different locations being more or less of a travel priority for travelers. Now, with more changes hitting different countries in different ways, that international effect is complicating things once again.
There’s a new wave of Covid-19, driven by a new strain. Fuel is more expensive, and in some locations more difficult to get - and while this impacts many industries, travel is impacted as directly as it’s possible to be. Inflation has driven prices up across the board. Geopolitical turmoil and weather extremes and events caused by climate change have shifted travel plans and priorities for businesses and consumers alike. And the headlines about air travel in particular recently… Well, more on that shortly.
Anytime there’s uncertainty, fraudsters view that as an opportunity. The more uncertainty, the greater the opportunity. It’s no surprise that many fraudsters went after travel as a potential cash cow at diverse points over the last two years. Equally, with many new fraudsters cutting their teeth on claiming benefits and loans for fake businesses during the pandemic, it’s no surprise that some of those are graduating to creating, and leveraging, fake online travel agencies.
The Spread of Friendly Fraud
The fraud prevention challenge hasn’t only come from professional fraudsters. As with other industries, friendly fraud has also adapted to the changing circumstances to become a serious concern.
Consumers who couldn’t take planned vacations due to pandemic problems, but also couldn’t get refunds, turned to first-party misuse, filing chargebacks and pretending they were due to fraud. Unfortunately this sort of cheating is habit-forming, and it’s not a trend that has disappeared with pandemic-related restrictions. In fact, many travel companies are reporting seeing the opposite effect.
With consumers either facing or fearing job losses or salary cuts/freezes, and with news about inflation hitting the headlines every week, many customers are looking for creative ways to decrease personal spending. Some of them are trying to do that without giving anything up. Inevitably, some of those turn to fraud.
We explored the increase of first-party misuse in a recent webinar with Karisse Hendrick which was both fun and fascinating. One thing was clear: Friendly fraud isn’t going anywhere, so it’s up to e-tailers to fight back.
Travel Chaos Breads Extra Fraud
So many travel-related businesses downsized during the pandemic - and so many are struggling both to staff up again to meet the increase in demand, and to find a working balance with employees (reflecting the current situation) that meets both their needs and those of the business.
From disruption and long queues in airports, to lost luggage, to hotel and hospitality struggles to maintain experience while stretched thin on staff and juggling to cover supply chain issues, to rail strikes and more, the travel industry is facing a lot right now. Travelers who aren’t satisfied with their experience may well use pandemic-gained knowledge of first-party misuse to file unfair chargebacks. They know, now, that fraud chargebacks are easier to file than service chargebacks - and more likely to result in their money back.
All this puts pressure on every department in the business, but fraud prevention teams certainly feel the impact. The scale of orders, the growth of friendly fraud, and consumers’ high expectations combine to make it harder than ever for manual reviewers to invest the time they need to achieve accuracy while hitting KPIs for speed.
Great Account Benefits? Hello, ATO
Loyalty programs are a staple of the travel industry, and many travel-focused companies are well-known for their partnerships with other related companies. Travelers love to collect miles, receive extra rewards for regular usage, leverage partnerships between travel companies in different countries, or between airlines and hotels, or use loyalty points to purchase luxury items.
Loyalty programs can be a huge asset to a business, especially within travel. Unfortunately, fraudsters see them as opportunities as well - most especially through account takeover style attacks. Until they’re cashed in, loyalty benefits are effectively a form of digital goods - and these are notably easy to steal, trade and sell online.
With phishing attacks spiking over the last two years, and consumers more stressed and less likely to take the time to investigate suspicious signals in emails, websites or phone calls, there’s a wealth of account information which fraudsters have access to. At the same time, fraudsters who are moving away from straight payment theft in certain markets (e.g. in response to PSD2 impact in the EU), are often attracted by the possibilities of ATO.
It’s often not fully appreciated that ATO attacks are typically carried out over a period of time, in a number of stages. It may well be that a fraudster (or several) “peek” into an account to see what it contains many times before moving to monetize it. Sometimes it’s a case of waiting until the right moment, other times it’s finding the fraudster who wants to make the move. Other times, a single fraudster will access the account multiple times in order to make their presence look legitimate by the time they actually make a fraud attempt.
With ATO up in many industries, fraud prevention departments need to protect their company. It’s not enough to be prepared, or reactive. Protection needs to be built into every stage of the account journey.
Travel’s Secret Weapon: Collaboration
While the travel industry has unique challenges, both inherently and up ahead right now, it also has a secret weapon. Travel companies are exceptionally willing to work together to support one another in identifying and preventing fraud. The same is true of fraud fighters more generally, but in travel the trend is even stronger.
What’s interesting about a lot of the fraud (and payments) challenges we’ve discussed here is that they come down to identity online. How do you know that this person, purchasing a ticket or making a reservation, really is a real person, and the person the identity belongs to?
The more travel companies find creative ways to leverage one another’s data, the more often they’ll be confident on when a customer is who they appear to be - and when they’re not. Consumers often have strong preferences as to which travel companies they use - you probably have a favorite airline or hotel chain yourself. But equally, logistical and pragmatic concerns often intervene, and most real travelers have a strong presence across travel companies.
If travel companies leverage that information, pooling their knowledge of real customers, then they have a reliable, in-depth view into the overwhelming majority of customers likely to come to their site. In the past, of course, this was limited by privacy, legal and competitive concerns, but Identiq is proof that that’s not a problem anymore. You can validate even highlight sensitive information, like credit card numbers, bank account info, and passport details - without ever sharing any of that personal and confidential information at all.
Confidence in identities, gained through this kind of meaningful collaboration, makes fraudsters easy to spot, identifies good customers instantly and invisibly, and even makes it simple to see which chargebacks you ought to be fighting.
The road ahead might not be easy. But working together, travel companies can glide over the bumps - and pass that smooth experience onto good customers, too.
Want to leverage other companies’ data to trust the right customers, without ever sharing any personal information with anyone, even Identiq? Join the network.
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If An Economic Downturn is Coming, Fraud Fighters Can’t Afford to Be Surprised