An Intro to Fraud in Online Travel
Here is a sneak peek at the report, which will be published in the coming weeks.
With over 1.2 billion international tourist arrivals registered worldwide in 2015, the online travel industry is experiencing an explosion in demand. Online travel merchants can take advantage of the growing number of travelers who use digital channels to book their flights. Digital travel sales in the United States alone were valued at over $200 billion in 2015, and globally, it is projected that online travel revenues will reach $762 billion by 2019.
Riskified’s work with leading travel merchants, as well as Fortune 500 companies across verticals, has given us great insight into helping merchants overcome the CNP fraud challenges they face. We are currently in the process of compiling a report sharing data about fraud patterns in online travel, and best practices for travel merchants looking to safely increase approval rates. Following is a sneak peek at the report, which will be published in the coming weeks.
Stop letting fear of fraud curb online sales
Alongside the booming business, online travel merchants face significant fraud challenges. By nature, flight ticket purchases are bound to have international characteristics, with passengers often booking tickets while travelling. In terms of the order data, it is very common to see a citizen of country X purchasing a ticket with a credit card issued in country Y, while connecting from a device in country Z. For airlines and online travel agents (OTA) the implications are that traditional fraud prevention methods that rely on detecting mismatches between geolocation data are ineffective. OTA’s must also balance the need to avoid costly chargebacks with the requirement for near-immediate purchase confirmation.
Too often, travel merchants respond to these challenges by adopting a conservative approach to fraud prevention, resulting in a high rate of good orders being rejected due to suspected fraud (aka false declines). Fraudsters definitely target airlines and OTAs, but digital travel orders are much safer than one might think. Riskified’s data shows that over 98% of online flight ticket purchases are valid. Merchants with lower approval rates are likely leaving money on the table – and are essentially sending good customers away to book tickets with a competitor.
To help merchants understand what they could be doing to make sure good customers aren’t turned away, we analyzed our data and identified legitimate shopping patterns that merchants can use to improve the efficiency of their fraud prevention operations.
Understanding mobile and desktop fraud patterns
MCommerce, or shopping via mobiles devices, presents a great business opportunity for merchants across industries, and is especially important in the travel industry. The value of travel bookings made through mobile devices continues to grow every year, with no signs of slowing down. In fact, mobile purchases are expected to account for 70% of total digital travel sales in the United States by 2019, with a total value of $95 billion.
However, a lack of familiarity and understanding of the relationship between technology and fraudster methodologies can make it difficult to create an effective fraud prevention strategy. For example, while it is true that fraud rates in mobile device orders are increasing, Riskified’s data shows 50% less fraud in airline tickets purchased via mobile when compared to desktop purchases. In other words, mobile orders are safer than desktop purchases in the case of online travel. Despite all the media reports about the dangers of mobile fraud, our data illustrates why it’s very important that travel merchants take the time to understand the characteristics of various channels and markets.
By tracking fraud and decline rates by channel (e.g. desktop vs mobile), online travel merchants can monitor mobile fraud rates and identify areas for improvement going forward. To improve fraud detection accuracy in mobile purchases, travel merchants can incorporate data unique to the mobile channel into fraud management systems. Data such as GPS location, mobile carrier information, and advanced behavioral analytics can all be used to inform travel merchants’ decisions.
Don’t miss out on increasing Chinese demand
China is an emerging market that is opening up to the world. It’s estimated that in 2019, 230 million more passenger journeys will be sold in the Chinese travel market than were sold in 2014. In fact, it’s predicted that by 2019 China alone will account for 17.2% of global digital sales, at a value of $131 million.
Unfortunately, merchants too often let unfounded fears of “foreign” markets keep them from increasing their revenues. In truth, Chinese shoppers are extremely safe for online travel merchants. For example, after analyzing fraud rates for tickets booked with Chinese credit cards, we see a 93% approval rate on orders for flights departing from outside China. This means that travel merchants selling legs that start outside of China, should be accepting at least 9 out of 10 orders placed with a Chinese credit card. Otherwise, they are simply not maximizing the revenue they could be capturing.
Ultimately, merchants should never let a single data point or fears of a certain market cause them to miss out on good customers.
Read the full report next month for more
This was just a small sample of the insights included in our report on CNP fraud in the travel vertical. The report will be published next month, and will cover topics such as the difference in fraud rates between domestic and international flights, the correlation between the number of passengers and fraud, and the rate of fraud in flights within the European ‘Schengen’ area.