Every year, more and more travelers choose to book flights online.
2020 will be a critical year for airlines. The COVID-19 pandemic wreaked havoc on the entire travel industry, bringing it to complete standstill in many places. While there’s no doubt the world will recover and normal life will resume, it’s difficult to assess when this will happen, and what the economic outlook will be.
Our report was written and published before the outbreak of this epidemic, and we’re confident it will become relevant for airlines soon enough.
Our report for airlines, Bolstering the Digital Channel to Power Growth, discusses the key trends impacting the travel industry and how airlines can address them by embracing a digital platform to boost the customer experience, drive the success of loyalty programs and ultimately grow revenue. It includes insights on the power of mobile apps and chatbots; the benefits and risks of global expansion; and offering a more customized travel journey using AI technology. In this blog, I share some of the report findings.
For many airlines, fraud is a secondary concern. But when scaling digital operations, fraud management cannot be left as an afterthought. It’s especially important to understand that risk varies greatly by sales channel. Understanding the risk level by device is important for adjusting fraud management strategies. Mobile orders — both web browser and in-app — are riskier. Desktop orders, on the other hand, are the safest and most common and experience 12% fewer fraud attempts than the industry average. Mobile apps are of particular concern as they can serve as a means of redeeming tickets. Since mobile apps tend to have less protection layers, airlines will need to determine how to safeguard customers’ accounts.
This isn’t to say that airlines should always adopt the same approach to reviewing mobile orders. Airlines’ fraud operations must account for other order details that impact risk. For example, although desktop orders are usually safer than mobile app orders, this is not the case for orders placed close to the departure date. Our data shows that last minute orders from a mobile device are less risky – and far more common. Desktop orders on the other hand, have the lowest share of last minute orders but the highest rates of fraud. This variance in risk highlights the importance of making sure that fraud management strategies account for when and how the order was placed.
Expansion & Untapped Markets
It will be crucial for airlines to strategically plan their global expansion efforts as a means of long-term growth. But due to the large investment required to promote new flight paths, airlines must find ways to protect against fraud-related losses. To fine-tune fraud review, airlines need an adaptable platform that can identify new booking and payment trends, and account for the hundreds of variables involved in accurately vetting an order.
Let’s say a potential customer in Arequipa, Peru is attempting to purchase a one-way flight from Caracas, Venezuela to Lima, Peru, more than two months in advance of departure. According to our data, orders based on an IP address from South America and Mexico tend to have higher rates of fraud, so the response could be to heavily screen orders from this region and block this transaction. Especially because of the one-way ticket– which doubles the risk compared to a roundtrip ticket.
But strict rules based on one market or region can’t provide a holistic view of the order in context: the recent political situation in Venezuela has pushed 4.5 million Venezuelan expats around the world. Hosting the highest number are Colombia, Peru, and Chile. Considering this information the flight path and one-way ticket make perfect sense for this customer. And due to the fact that it was ordered in advance, which tends to be a safer behavior than last-minute bookings, the legitimacy of the order could be further corroborated. These insights are often missed by rule-based systems and airlines end up absorbing the costs.
Loyalty programs cultivate trust–and members value better security, service, and care. This makes keeping loyalty accounts safe critical for brand reputation. But loyalty accounts are a fraudster favorite–and as airlines add new features and redeeming options, fraudsters find more vulnerabilities. Account takeover attacks are a particularly difficult form of fraud, one that airlines are especially vulnerable to, with multiple airlines recently suffering high profile data breaches.
Riskified’s research team finds plenty of verified airline loyalty credentials on the dark web. Because it’s common for customers to store significant amounts of value in their accounts, the listings usually specify whether the account contains points or miles. And for the fraudster, life could not get any easier. Once they get the credentials, they don’t need a stolen card to take advantage of in-store credit on the account, frequent flyer miles, or reward points. The first line of defense against these attacks is ATO detection at login, especially since accuracy and response time are critical in the travel business. To detect these attacks there are two main facets: detecting changes in behavior and device, and bot detection. For more tips on preventing these attacks, read our ATO in travel report.
According to a recent forecast from IATA, the number of global air passengers in 2037 could reach 8.2 billion – quintupling the 1998 numbers. To capture this opportunity in today’s digital age, airlines need to excel in three key areas: enhance the online booking experience, appeal to new global customers and young travelers, and boost the effectiveness of loyalty programs while keeping customer accounts safe. Airlines that succeed in these three realms, will be well positioned to grow their direct distribution and remain competitive against other players in the travel space.