Introduction

Consumers are increasingly turning to digital channels to make travel-related purchases. Online bookings accounted for over 40% of total travel sales in the US and Europe last year, and by 2017, the global online travel industry is expected to be worth $830 billion. Airlines and travel agencies are doing everything they can to take advantage of the enormous opportunity presented by the booming online travel sales market. But unfortunately, so are fraudsters.

Ecommerce merchants across all industries put in endless effort to protect their revenues from fraud, but the online travel vertical faces unique challenges. For starters, traditional fraud detection methods rely on geographical indicators to detect fraud. However, measuring the distance between the billing and shipping addresses, or detecting mismatches between the credit card issuing country and the IP address, are less effective when applied to purchases by consumers who are often in-transit when placing their order. This makes geo-mismatches common in both legitimate and fraudulent online travel orders, with the result that relying on these characteristics to determine which purchases are rejected or routed to further validation can lead to a high false decline rate.

Another challenge is that travel reservations are an interchangeable digital good. Legitimate customers who are falsely declined by an airline or online travel agency (OTA) due to suspected fraud can easily purchase tickets for the same flight on a competing site. In other words, travel merchants who wrongly reject a good customer due to suspected fraud lose not only the revenue from the lost sale, but might also be “sending” these customers to their direct competitors.

By improving fraud operations, merchants in the online travel industry can not only reduce fraud-related losses, they can enhance customers’ shopping experience. Distinguishing between fraudulent methods of operation and legitimate shopping patterns in this fast-growing market is the first step travel businesses can take to optimize their fraud prevention systems. The following report presents Riskified’s insights into fraud in the online travel vertical, based on our experience partnering with Fortune 500 companies and industry leading retailers across markets and industries. Throughout the report we share our observations and provide tips for accurate and effective fraud management.