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4 Reasons Fraud Risk in the Travel Industry Is Different


4 Reasons Fraud Risk in the Travel Industry Is Different

By Ana Carolina Alves, Product & Marketing Manager at ClearSale

Fraud is a phenomenon already known by retailers around the world, especially in card-not-present sales. One unidentified attack at the right (or wrong) time can ruin a merchant's business and dreams.

To combat fraud, we must always remember that fraudsters are like companies in many ways: They seek profitability and, therefore, keep an eye on market demands (like products customers want), monitor inventory levels, assess the risk of their "investments," and even form associations to share best practices.

Fraudsters frequently target the travel segment, due in part to the industry's high and rapid profit opportunity. Here four other reasons fraud in the travel vertical is different from fraud in other industries.

1. It's Less Risky for the Fraudster

When fraud involves the delivery of a product, the fraudster is always exposed at some point during the transaction. He'll need to ensure the product's receipt, either through local delivery or by partnering with other fraudsters in the delivery chain.

But because travel reservations are received by email, fraudsters don't need to worry about changing the address for the physical delivery. And because the fraudster isn't usually the passenger, he has less exposure risk.

And because there's less evidence to distinguish authentic transactions from fraudulent transactions in the travel industry, fraud prevention is made more complex.

Generally, the fraudster doesn't need to change much data on the stolen financial data to get away with the transaction — just the delivery email address. And because it's fairly common for individuals to buy authentic tickets for third parties (e.g., parents buying for children, friends buying for friends), these transactions aren't likely to raise red flags.

2. The Resale Happens Before the Fraud

Fraudsters generally focus on products with the best combination of high value and high demand, like smartphones. To generate a profit with stolen products, the fraudster needs to have the transactions successfully process and receive the actual product.

In travel, the situation is reversed. The fraudster works with the end buyer to determine the date and time for a travel ticket. The fraudster first receives payment for this ticket and then performs the fraud to obtain the ticket. It's a can't-lose situation for the fraudster: Even if the fraud is identified and the end buyer can't use the ticket, the fraudster has already profited from the sale.

3. Passengers Don't Know Their Ticket Was Purchased Fraudulently

It's not unheard of for fraudsters to pose as travel agents and offer special prices to attract customers. The ploy is so convincing that passengers have no reason to think they haven't bought a legitimate ticket — until they arrive at the airport and are denied boarding.

The airlines themselves assume a significant amount of risk here: They need to manage the situation with skill and diplomacy, lest they experience viral hits to their reputation. 

4. Everything Is a Matter of Timing

When a fraudster purchases a travel ticket, they're always for a certain date and time. So a fraudulent ticket purchased well in advance of that flight increases the chances the legitimate cardholder will notice the transaction, report the fraud and cancel the ticket. So it's in the fraudsters best interest to purchase last-minute tickets, allowing him to keep up with demand while assuming a lower risk of getting caught. Remember: Fraudsters are always seeking maximum profit with minimum risk.

How the Travel Segment Can Stay on Top of Fraud

Because travel is so attractive, fraudsters are always looking for new points of weakness — and that means fraud protection solutions must also always be evolving and merchants must always keep a watchful eye out for fraud.

For these merchants, generic prevention solutions tend to be slower in detecting and reacting to purchasing behavior changes, making them less effective at combatting fraud. Smart merchants are using platforms that implement multiple approaches to detecting fraud — such as artificial intelligence, behavior analytics and supported monitoring — that lets them customize their approach to each client.

Maintaining low levels of fraud without impacting revenues isn't easy, but the right solution will strike the perfect balance. Contact the experts at ClearSale today to learn how we can offer this peace of mind for each of your online sales.

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