Fraud is eating 1.5% of the revenue from airline tickets sold online as merchants struggle to block criminals without making the purchase process too cumbersome for consumers.
Some 66% of merchants that sell airline tickets online say fraud levels are either rising or holding steady despite stepped-up efforts to block fraud, new survey data from WorldPay suggest.
"Serial fraudsters will prey on vulnerabilities and merchants need to make it as difficult as possible" by adding layers of protection including background-screening to flag suspicious activity, Philip McGriskin, WorldPay's chief product officer, said in an interview.
Call centers also pose a growing area of fraud risk for airline tickets, he warns.
"Whenever card numbers are exchanged in a nonsecure environment it heightens the risk for merchants," McGriskin says, noting that organized crime rings find various ingenious ways to intercept card numbers. A number of recent fraud cases involving call centers originated from the Caribbean, U.S., Canada and Africa, he says.
United Kingdom-based payment processor WorldPay conducted its online survey in February among 51 airline ticket merchant executives and 4,500 consumers in the United States, United Kingdom, China, Japan, Brazil, Finland and Spain. The consumers had each purchased an airline ticket online within the previous 12 months.
One of the top fraud tactics plaguing airline ticket merchants is "friendly fraud," where a consumer purchases a ticket and falsely claims they never received it. Fraudulent airline ticket purchases by organized crime rings are also high on the list, McGriskin says.
Friendly fraud is tough to beat, because a certain percentage of consumers continually will try it, McGriskin says. But merchants can easily heighten their customer screening routines to block much of it, he contends.
One of the biggest challenges for merchants is balancing appropriate fraud-screening processes with the inconvenience it can cause for consumers, analysts say.
Fraud isn't the only problem plaguing airline ticket sales — rocky payment procedures pose other problems.
Some 50% of merchants surveyed said the main reason consumers fail to complete airline ticket purchases is because their transactions were declined for various reasons, while 6% of merchants cited "hidden surcharges" as the main reason consumers drop out before completing purchases.
Only 7% of consumers cited transaction-declines as the top reason they abandoned ticket purchases, while 36% said surcharges tacked on at the end of the transaction caused them to cancel a purchase.
All types of airline ticket fraud are rising, but friendly fraud is rising fastest, Julie Conroy McNelley, senior analyst and fraud expert with Boston-based Aite Group, said in an email.
As merchants look into new fraud-blocking measures, many are leaning on methods that are invisible to consumers, such as behavior analytics, anomaly detection and device fingerprinting, McNelley says.
"There is a huge level of sensitivity to shopping cart attrition, and introducing friction into the transaction is a sure way to induce attrition," McNelley says.
The vast majority, or 84%, of airline ticket merchants said they plan to offer more choices in payment types over the next two years, including unspecified alternative payments.
Some 38% of consumer respondents said they would use a different airline if their preferred airline no longer accepted their preferred payment method. More than half, or 58%, of consumers said they would consider using their mobile device to pay for a flight.