10 Reasons Why You Can’t Afford to Ignore Payment Fraud

A guide for the travel industry from
Sift Science and PhocusWire

Online fraud is a critical issue for many industries, and travel is one of the hardest hit.

Fraud costs travel companies billions of dollars every year.

In the airline industry alone, payment fraud costs $858 million annually.

For travel brands, the rise of payment fraud has gone hand in hand with the rise of online shopping.

The same tools and user design strategies that have made it easier than ever for consumers to book trips and experiences with the click of a few buttons have also created vast opportunities for criminals.

Here are 10 reasons why you should take fraud seriously:

#1

Fraud is very common, and perpetrators are only getting more sophisticated in uncovering new ways to compromise online payment channels.

Experian analyzed millions of online transactions and found that online shopping fraud grew 30% in 2017 compared to 2016.

That’s nearly twice the growth rate of ecommerce sales.

#2

Fraud will become an even bigger problem in the travel industry as digital bookings are on the rise around the world.

According to Phocuswright, online gross bookings in the United States jumped 6.8% in 2017 to nearly $172 billion, and similar growth is predicted for 2018.

In addition, online travel bookings are expected to increase from 48% in 2017 to 53% in 2021.

#3

Fraud impacts customer experience.

Customers expect a simple, seamless experience when they search and book online.

But some fraud detection and prevention strategies can create roadblocks and friction during the checkout process.

Seventy-two percent of businesses worry that fraud prevention efforts could turn away good customers.

#4

Fraud affects reputation management.

Customers have an expectation that information they share is safe and that companies will protect them from account takeover.

A breach of that trust can cause permanent damage to a brand.

And through the power of social media, one incidence of fraud has a ripple effect on a brand’s image.

#5

Fraud affects loyalty.

Today’s travel landscape is more competitive than ever.

Brands are working overtime not only to attract new customers but to keep the ones they have.

A single instance of fraud can destroy that loyalty.

#6

Fraud affects a company’s ability to innovate and grow.

Companies that manually review and monitor transactions to catch fraud must maintain those resources 24/7, 365 days a year.

That is a massive investment of both human and capital resources that can put the company at a competitive disadvantage.

#7

Fraud affects the bottom line.

Travel often involves high-dollar transactions that happen quickly, so companies must be fast to detect and prevent fraudulent purchases.

In addition to missing out on legitimate ticket revenue, travel brands can end up paying chargebacks, fines and processing fees – adding up to hundreds, even thousands, of dollars down the drain on each fraudulent transaction.

A Phocuswright study found that travel agencies spend an average of 1%-2% of their revenue to manage fraud.

The rate is only slightly lower for airlines as carriers report rejecting or canceling almost 4% of bookings due to fraud.

#8

Fraud affects the ability to move into new markets.

Travel companies need smart, agile tools that can adapt to the unique risks that exist in different cities and countries.

Without effective fraud detection and prevention systems, a company may be hesitant to accept new currencies because the risk of fraud may make those markets not viable economically.

#9

Fraud prevention strategies can bolster confidence from stakeholders.

These can include investors, partners, suppliers, insurance companies, employees, etc.

A case of fraud that affects a company’s reputation can also affect its market value, creating a negative ripple effect throughout these stakeholder communities.

#10

Fraud is a constant and increasing risk for brands that conduct business online.

That’s why Sift Science has a dedicated team of professionals working to stay several steps ahead of the criminals.

They do this by developing state-of-the art fraud detection and prevention solutions powered by machine learning.

In fact, Sift Science is the only company to use Live Machine Learning, automatically utilizing experience from its global network of customers to give clients a clear view of good and bad users – so they can stop fraud before it happens.

So, what's next?

To learn more about how the travel industry is affected by fraud, download the e-book...

"The Future of Fraud-Fighting in the Travel Industry"

This extensive guide offers information about the top signals of travel fraud, issues around loyalty programs, and more.

And for more information, visit siftscience.com/travel or contact [email protected].