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Fraudsters Nab $1.4 Billion from Airlines

MOUNTAIN VIEW — Survey findings released today by CyberSource Corporation, a Visa company (NYSE: V) show that while airlines are gaining in their war against fraud, much work remains to be done. Airlines reported a loss of about $1.4 billion USD to online payment fraud in 2010.

Dr. Akif Khan, CyberSource's Director, Products and Services said: "The good news is that in terms of fraud loss rates, 2010 results showed a 31 percent improvement over 2008. Clearly, airlines have not only recognized the challenge but have made timely adjustments to it." According to the survey, changes made by airlines in the last two years include higher use of fraud detection tools in automated screening (7.3 on average, compared to 5.8 in 2008), along with rejecting more bookings due to suspicion of payment fraud.

Selected survey findings

  • Experience counts: airlines with less than three years of online selling experience have higher fraud loss rates, manual review rates, and higher reject rates than their more experienced competitors. For example, airlines with more than ten years of online selling experience manually review 15 percent of their bookings; those with fewer than three years review 53 percent.
  • Airlines may be ignoring a powerful anti-fraud tool: Only three percent of airlines surveyed used public record searches to validate bookings. But those that used the tool felt it was one of their most effective anti-fraud measures. (Public record searches are not universally available). Device fingerprinting and third-party fraud scoring models were among the top tools merchants cited as considerations for future use.
  • Automated review requirements will accelerate: According to the International Air Transport Association, passenger revenue will increase by 7.3 percent in 2011, but nearly 90 percent of airlines surveyed say their manual review staff levels will remain the same. Automation will have to make up the difference.
"Fraudsters will move to the weakest link in the chain," said Christopher Staab, Managing Partner of Airline Information. "And that weak link is most likely going to be the airlines unfamiliar with how sophisticated fraud can be perpetrated with online ticketing sales. That's why this type of data is so critical for the airline industry worldwide. There are solutions out there–airlines need to implement them."

A typical fraud scenario in the airline industry plays out as follows:

  1. Fraudster illegally obtains credit card data;
  2. Fraudster obtains name, address, and other appropriate information for a genuine customer interested in buying "discount" tickets;
  3. Fraudster buys the ticket in the innocent person's name, using the stolen credit card number;
  4. Fraudster delivers ticket to the customer and receives payment in cash.
CyberSource announces new travel-specific fraud-tuning capabilities

CyberSource is also announcing release of new fraud detection algorithms for its Decision Manager system, created specifically for the travel industry. Data generated from inbound booking requests, including device identity and behavior information, is correlated with transaction data generated by merchants worldwide. The new travel algorithms take the unique purchasing patterns of the travel industry into account, where multiple bookings from frequent travelers or travel agencies are common. The results of these correlations can then be compared to business rules established by the airline to automatically accept, reject or review the booking. Because valid bookings can now be more accurately and automatically separated from fraudulent bookings, airlines and other travel companies can further reduce costly manual review and fraud loss. To see the full survey – for journalists: please call or email the contacts listed below. For all others: please visit www.cybersource.com/airlinefraudreport.

Methodology

The Airline Online Fraud Survey was commissioned by CyberSource Corporation in partnership with Airline Information. Data was compiled in an online survey delivered by an independent market research firm. The surveys were fielded between November 17, 2010 and January 31, 2011 and yielded 142 qualified completed interviews. 72 percent of respondents indicated their airline had total revenues over $500 million USD.

About CyberSource

CyberSource, a wholly-owned subsidiary of Visa Inc., is a payment management company. Over 330,000 businesses worldwide use CyberSource and Authorize.Net brand solutions to process online payments, streamline fraud management, and simplify payment security. The company is headquartered in Mountain View, California with international offices in Reading, U.K.; Singapore; and Tokyo. CyberSource operates in Europe under agreement with Visa Europe. For more information, please visit www.cybersource.com.

Media Contact:

James Delves Noiseworks on behalf of CyberSource +44 (0) 1628 628080 cybersource@noiseworks.com

Global Corporate Relations Contact: Bruce Frymire CyberSource Corporation 415.932.2564 globalmedia@visa.com 
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