Top fraud challenges for travel companies

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Top Fraud Challenges for Travel Companies

Almost 40% of travel companies experienced ‘significant’ financial distress during the last quarter of 2016, according to insolvency firm Begbies Traynor. The growing scourge of fraud is surely one of the contributing factors:

•  According to Phocuswright, the most commonly-booked travel products — air travel, cruises and vacation packages — are also the most targeted for fraud.
• Online bookings through agency sites now have the highest rate of fraud and this kind of fraud (card-not-present) is projected to increase by +25%.
•  While mobile commerce has revolutionized the travel industry, mobile transactions are twice as likely to involve fraud as conventional eCommerce, according to The Fraud Practice.

Actual, direct losses from fraud are only one part of the problem. There is foregone revenue, too. As losses mount, wary travel providers err on the side of caution and turn down more and more transactions. For example, decline rates for travel eCommerce transactions can be as high as 25%. Yet known rates of fraud are nowhere near that high. This discrepancy indicates too many valid orders that merely appear suspicious are being turned down.  

Finally, there is the "hidden" cost of fraud of higher operating expenses. Travel providers are spending more time and more money vetting transactions. In fact, travel and leisure businesses review a much higher percentage of transactions due to lack of automation. It’s not unusual for up to 50% of transactions to be manually reviewed. And reviewers account for the largest portion of fraud prevention costs. 

What can travel and leisure companies do to overcome these challenges?

Fortunately, there are fraud prevention solutions offered by a number of well-known, established providers. Look for the following capabilities to ensure you get an effective, affordable, and easy-to-use solution that delivers maximum ROI: 

1. Software As A Service (SaaS). Buy as much or as little fraud prevention as you need, without having to invest in IT hardware, software, in-house experts, etc.  
2. Multiple, Integrated Screening Technologies. Avoid ad hoc technologies or stand-alone tools. The more technologies employed, the more likely fraud is to be detected.
3. Big Data Orchestration. An anti-fraud solution should integrate multiple, best-in-class information sources. Factors that might seem inconsequential within a smaller data set are revealed to be critical by Big Data analysis.
4. Advanced AI and Machine Learning. Essential for detecting hidden patterns amongst billions of transactions in real-time to thwart fraud in low-information scenarios (e.g., first-time fraud).
5. Human Fraud Experts. Computers are smart, but smarter when guided by human experts who can help you strategically respond to thinking adversaries (fraudsters).
6. Proven Industry Success. Webjet, Australia and New Zealand’s leading online travel agency, employed the Kount Complete solution and saw their chargeback rate drop to 0.03%. At the same time, their order acceptance increased 116% and the number of bookings reviewed dropped by 83%. Less fraud, more sales, and lower operating expense. Make sure the fraud-prevention solution you choose can deliver this kind of travel industry performance.   

To learn more about emerging fraud trends for travel companies and strategies to reduce losses without slowing revenue, download the eBook: Fraud Takes Off in the Fraud and Leisure Industry.