The pre-workshops and part of the first day at ATPS 2009 focused on fraud. Here’s a round up of my impressions after a full day of panel discussion, presentations, and breakout sessions. Once the presentations are up on the ATPS site I will provide links to each speaker’s deck. Presentations are here.
According to 41st Parameter, a fraud detection firm focused on device intelligence, card not present fraud and account opening fraud, 21st Century cyber criminals are highly sophisticated:
- They have credit cards that pass validation
- They can mask their IP, country and city location
- They book reservations under the cardholder name often burying the traveler as an additional passenger on the reservation
- They tumble and swap names and email (e.g. Jan123@xxx, Jan456@xxx)
- They create imposter agencies where real customers pay them real money for fraudulent or non-existent tickets
- They book multi-leg flights and ditch all but one leg of the trip.
Profit losses for 2009 in the airline industry are estimated to be $11 billion according to International Air Transport Association. The new study from Cybersource estimated online fraud alone in the airline and travel segment to be $1.4B in 2008 or ~1.3% of online revenues (see previous post). Fighting fraud and reducing false positives across all channels can have a real impact on airline profitability. The three most significant themes from ATPS on fraud were around patterns of fraud, positive data and collaboration.
The three most significant fraud themes from ATPS were patterns of fraud, positive data, and collaboration:
Patterns of Fraud
Fighting fraud requires understanding the patterns of fraud through sophisticated and flexible modeling. Airlines are fortunate to have much more data than most merchant categories in fighting fraud; the correlation of multiple data points supports better fraud identification. Solutions like 41st Parameter and Accertify can have significant impact on reducing chargebacks and also reducing false positives leading to higher sales.
41st Parameter discussed the benefits for airlines of using all the data available to fight fraud. Sources include the passenger reservation and itinerary information, member loyalty programs and in addition, 41st can bring to bear the customer’s digital signature and Ethoca’s pooled merchant database of e-commerce fraud. Continental has had a positive experience implementing 41st Parameter and SouthWest airlines has had postivie experience implementing Accertify (case study). Both airlines shared the benefits they’ve experienced, including reduction in bad debt, manual reviews, staff for manual review and false positives.
Collaboration
According to Ethoca, 40% of fraud has happened before to another merchant – either another airline or a company in another business. They provide a large transaction database pooling member experience across industries into a single repository for analysis of trends to find fraud.
Martinair had high fraud experience a couple year ago that motivated them to collaborate. They work with European payment services provider Ogone in the virtual world and, on five continents, at airports and in call centers. IATA was also in attendance to announce their efforts in data collaboration to stop fraud, a solution called Perseuss. Perseuss is a web based community allowing airlines to cooperate to identify and fight fraud schemes.
One of the most interesting conversations around the sharing of fraud experience was whether this should be implemented at an airline, Card Issuer or Card Association level. If airlines share their transaction data and fraud experience, can the associations package this data to the issuers for their decision and authorization process?
These are just some of the many tools with features and approaches that can result in your business reducing fraud, improving prioritization for manual review, and reducing false positives. Selecting the right player to support your fraud detection efforts deserves careful consideration. Let us know if Glenbrook can help your company evaluate its fraud options.