The world’s airlines got better at detecting online fraud during 2010, with the number of rejected bookings rising to over three in every hundred attempted, a new survey has calculated.
The 142 mostly European, Asian, South American and US airline participants in CyberSource’s annual Airline Online Fraud Report admitted $1.4 billion (£856 million) of online fraud and credit card chargebacks, a drop on 2009’s $1.7 billion figure.
This is a 31 percent reduction in online fraud since 2008 to give the industry a rate of global fraud rate of 0.9 percent, not including fraud conducted by telephone.
The reduction in fraud appears to have been caused by better use of fraud detection, with the rate of rejected sales among surveyed airlines now at 3.3 percent compared to 2.8 percent in 2009. A quarter of the airlines surveyed reported rejection rates of over 5 percent.
Airlines under three years old suffered higher fraud levels than older ones, again suggesting the possibility of more honed fraud detection amng mature companies. In total, around one in four online bookings are reviewed manually.
Interestingly, low-cost carriers were reported as having fraud and chargeback rates of only 0.4 percent of sales, around a third that of full-fare airlines. This could be down to better fraud detection or simply less willingness on the part of customers to pursue chargebacks against these carriers in the event of a dispute.
In a cutthroat business with slim margins, CyberSource recommends that airlines balance the need for fraud detection with balanced security.
“Online payment fraud continues to impact revenue from online sales. However, other than direct revenue loss due to fraud, there are additional costs such as the rejection of valid bookings, the staffing of manual review teams, the administration of fraud claims and the challenges associated with business scalability," noted the authors.
“Inefficiencies and further profit loss can occur if the airline’s payment fraud processes and the above costs are not carefully managed.”
Airlines are now benefitting from a wide range of anti-fraud systems beyond traditional credit card checks, including card network authorisation systems, analysis of purchasing history, and even the geographical location of the PC from which a purchase is being attempted, the report said.