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The Clearsale Blog

ClearSale discusses CNP fraud in the travel industry at Travel Daily News

ClearSale discusses CNP fraud in the travel industry at Travel Daily News

The recent rise in card-not-present (CNP) fraud targeting online retailers – and how best to fight it – has been a hot industry topic over the past year, but retailers are not alone in facing fraud and losses due CNP fraud. The travel industry has also become a target for online fraudsters worldwide. Fraud losses eat into margins for hotel chains, car rental agencies and airlines, but the most damaging effects may fall on travel agencies and small hospitality operators. Why is CNP fraud such a problem for the travel business now, what makes it such a tempting target, and how can travel businesses fight back?

Whether it’s scamming free flights with stolen credit card numbers, booking hotel stays to test stolen card numbers’ validity, or falsely claiming fraud after a tour or trip, travel fraud is a big, organized business. Last October, for example, law enforcement agencies from more than 40 countries arrested nearly 200 people in a coordinated operation targeting airline fraudsters. According to Europol, such fraud costs the airline industry more than a billion dollars every year. For smaller operators like travel agencies, the losses are smaller but the stakes are higher.

Low margins, high risk for travel agencies
Unlike retailers, who earn the full value of each online sale, travel agents earn a percentage of each ticket, rental, stay or travel package they book in the form of convenience fees paid by clients and commissions from travel providers. Just like retailers, though, travel agents are responsible for the full cost of any fraud-related chargebacks if they don’t meet certain transaction requirements.

According to the Travel Market Report, this means that a travel agent who earns a fee of a few hundred dollars putting together a trip for an online client may be liable for thousands of dollars in lost sales if the customer turns out to be a fraudster. For a small to midsize agency, such a loss can cause lasting damage, from cash-flow problems to lawsuits.

Unique fraud-screening requirements for travel operators
In addition to this revenue structure, travel agents (and providers) have payment processing requirements that are unique to the industry, especially when it comes to the timing of orders, approvals, and travel dates.

For example, travel agencies’ fraud protection tools must factor in the holding time agencies face when they buy tickets for a client. The holding period, during which the agent and providers verify ticket availability, can be up to 24 hours. During that time, the funds available on the credit card can change, so an approval early in the hold period might be invalid by the end of that time. Fraud screening programs must consider this long transaction window in order to protect agencies from costly chargebacks.

 

Continue reading at Travel Daily News.

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