News | DistributioneNett's Jason Hancock exposes the direct and indirect cost of B2B fraudThis article was originally published onBy Martin Cowen | March 27, 2018 This is the first in a series of articles spun out of [email protected], recorded live over three days at ITB Berlin this March. More clips and interviews to come here, as well as on our YouTube channel.Fraud costs the travel industry more than $20 billion a year, with the biggest hit by far allocated to the indirect cost line, according to Jason Hancock, eNett's general manager for Europe.Interviewed as part of [email protected] he talked about some research eNett recently commissioned into fraud, noting that fraud is a huge issue in payments, a huge issue in travel and therefore something eNett - a specialist in travel payments - felt the need to highlight.The topline finding was that fraud in travel results in costs to the industry of $21 billion a year.He qualified this by saying: Only $6 billion was associated with direct costs, the actual losses associated with the fraud. Looking deeper, there's an even greater set of losses associated with indirect costs... such as the operating cost of managing the fraud. The study found that 20-30% of transactions where a payment was initiated were being manually checked to catch the fraud - for a business operating at scale imagine how challenging and costly that actually is.Share this quote Other indirect costs include fines, once authorities have been alerted to a company not having the correct controls in place, and the reputational damage to a brand once consumers and the wider public become aware of its exposure to fraud.Watch the video and read the edited transcript to find out more. Martin Cowen: I know that you've recently commissioned a very detailed report into fraud in the travel industry. So, just maybe to start by explaining why you felt there needed to be this piece of research done into fraud in travel.Jason Hancock: Fraud has always been considered a huge issue so we decided to commission this piece of research for the benefit of our customers and also the industry as a whole. Edgar, Dunn and Company, a specialist payment consultancy, helped with the research piece and it's brought out some quite interesting findings.Such as?As an indication of the scale of fraud and how much it is on travel intermediaries or travel agencies' minds, 57% of travel intermediaries in the survey said that fraud on incoming payments was a top issue for them, and equally in thinking about the whole payment value chain.An even greater number actually, 60% of travel intermediaries, felt that fraud was a top issue in making payments to their suppliers, the B2B payment side which is where eNett is currently playing.In terms of the B2B, the payment from the travel intermediary to the supplier, where's the fraud happening there? How is that being corrupted by the criminal elements? It's very similar to the B2C side. Interception of card payments, suppliers setting up fake hotels, mass creation of card numbers and floating them into the industry which happens equally in the B2B chain as it does in the consumer chain.Again, an indication of the scale of the problem for the travel industry that the research says that $21 billion is the amount of cost impact of fraud on the travel industry per year.Interestingly, only $6 billion of that was associated to the direct cost of the actual losses incurred due to that fraud. Looking into that a bit deeper, it's be like the tip of an iceberg. There's an even greater sets of costs below the surface in indirect costs. So, that's things like lost revenue, the operational cost of management of that fraud.Edgar Dunn found between 20% and 30% of transactions where a payment was initiated were being manually checked to catch this fraud. So, you can just imagine with a business operating at scale, how challenging that is and how costly that is for companies.And also in terms of indirect costs, any fines associated with not having the correct controls in place and reputational damage for the customer itself. So, a huge issue. Can technology help this by sort of detecting fraudulent patterns from suppliers or is it a question of training your staff not to respond to phishing e-mails? Is technology the answer or is it more of a sort of cultural issue? I'd encourage people to look at the white paper because in that we highlight 12 benefits of best practice to mitigate the fraud and that's both on the consumer-to-business fraud - accepting payment - and the B2B paymentsIt's things like ensuring that when you on-board your supply, you know who your supplier is. Just think about some of the global online travel businesses that have portfolios of suppliers across the world. So, hundreds and hundreds of thousands of properties, individual guest rooms when we're talking about the Airbnb, HomeAway models.To your point, one way you can look to mitigate that is not only understanding who your supplier is through on-boarding but through your choice of payment method to that supplier. That's, as you know, where eNett play significantly through our virtual card solution. And virtual cards generally are now thankfully much more well-used and more well-known in travel and really help travel agencies gain control around the payments that they're making versus more traditional payment methods. Other than this fraud project that you've done, what else is happening at eNett that we need to know about? Sure. So, the business is growing fantastically. We're very fortunate to be growing with our customers. Another thing we didn't talk about is when you implement tools such as virtual cards to mitigate things like fraud and drive cost efficiencies, that enables businesses to scale. So, we're very fortunate in that by delivering our services to customers, we're actually helping them grow and benefiting from that.So, the future for us is to continue to evolve our platform at the very heart of our core values. Our vision, our mission is to really drive out the complexity in B2B payments and we'll continue to evolve our current platform but invest in new technologies to do that as well.[email protected] was presented by Travelaer, with further support from eNett, MMGY Global, and Cendyn To learn more about how to bring [email protected] to your event, please email Ella Sopp.