Airlines are not strangers to turbulence. But in early 2020, the COVID pandemic introduced airlines, and the global travel industry, to challenges on a new scale. With vaccine rollout, the future is promising but the business environment will continue to be a challenging one.

If airlines take advantage of the current ‘downtime’  to prioritize cost-saving solutions, they can actually emerge stronger from this crisis. In this blog, I’ll explain how our recent partnership with IATA can help airlines fight fraud costs and future-proof their business.

Fraud costs

According to RSA Security and Juniper, airlines are the vertical most affected by online fraud, accounting for 46% of fraudulent transactions. Online travel tickets have always been highly coveted by fraudsters. Beginning in April 2020, we saw unprecedented fraud attempt rates for air travel tickets, higher than any other industry segment. This was most likely due to the fact that other industries like fashion and electronics saw an increase in new customers as eCommerce stepped in to fill closed storefronts. An influx of legitimate transactions can outweigh the fraudulent ones. As travel reached a standstill, the fraudulent activity in the segment took up a bigger piece of the pie.

With demand still impacted, fraudsters seemed to lose interest in the summer and fall months and fraud attempts steadily decreased after April. Nevertheless, since January 2021, as the virus began waning down in many countries, flight volume has started to pick up, and fraud has followed.

Airlines don’t only absorb the chargeback, but the operational costs of maintaining internal fraud management teams and fraud detection software services. And then there’s brand reputation. According to management consultants Oliver Wyman, fraud cases lead to additional reputational loss of ~140%. To avoid this fallout, some merchants may respond with a fearful approach to order review. The result? In most of the world, the average rate of bookings rejected is 3.8%. In North America, estimates are double that. At a time when customers are only just beginning to gain their confidence in booking travel, a false decline can be even more devastating and could send a lucrative customer straight to the competitor. 

How can IATA’s partnership with Riskified help? Member airlines will be able to quickly and easily activate Riskified’s fraud solution consistently throughout all of their distribution channels from eCommerce to agency sales including NDC. So airlines can safely shift the fraud chargeback liability and approve more ticket orders, all while not requiring any additional investments in development resources. How exactly will it work? IATA member airlines that use the IATA Financial Gateway (IFG) will benefit from Riskified’s automated review decisions backed by a 100% Chargeback Guarantee.

The case for future-proofing

Even if airlines are happy with the performance of their fraud solution in their existing markets, it doesn’t necessarily mean this will remain the case when expanding and taking on new customers. Covid was the perfect example of how new behaviors and patterns can seriously impact revenue. For example, travelers are now booking much closer in advance to their departure dates. Unfortunately, last-minute orders are notoriously risky and common practice for fraudsters. These risky patterns becoming safe have made for a trickier fraud review and as a result, some airlines have had to do a complete review of existing fraud rules and increase manual review as a way to try and save sales. But this is not scalable. Rules are not easy to time-proof. They require significant in-house resources to stay relevant and need to be tweaked and updated regularly since fraud patterns evolve constantly. Machine learning models, on the other hand, are able to improve accuracy at scale. 

What’s an example of this in practice? One of our leading travel merchants was sending their risky orders and declines to 3DS. They had high decline rates, and friction at checkout led to a poor customer experience. Once they started working with Riskified, they benefited from instant, frictionless, decisioning which led to a 152% increase in their approval rate for high-risk geographies and a loyal returning customer base. Success led them to open up new product offerings through Riskified like attractions and ground transportation. Whether it’s new products or launching new digital channels, or omnichannel flows, merchants need a partner that can help them adapt and scale – without exhausting internal resources.

Conclusion

Selling online today offers a major revenue stream for businesses, but also presents many challenges – especially under the pressure of a major crisis, where customer loyalty has never been more at stake, and margins never thinner. With the Riskified-IFG integration, we do the heavy lifting so that member airlines don’t have to. In the race to stay ahead of the competition, airlines need a strong technological partner that will maximize their success, no matter the challenges that lay ahead. Stay tuned for our upcoming airline report for more insights on how we can help the industry not only come out stronger, but stay relevant to their customers well beyond the pandemic. Contact [email protected] to learn more.