The Top 4 Travel Fraud Threats & What You Can Do About Them
If you’re reading this, you’re probably aware that fraud is an issue in the travel industry. You may not realize, though, just how much of a problem it’s become for everyone operating in the space.
Around 60 percent of travel intermediaries surveyed in a recent study by eNett said fraud is a major concern for their business. Furthermore, a majority identified their online channel as having the highest risk. That’s in line with plenty of other data across multiple verticals, all of which supports the idea that card-not-present transactions entail far more risk—and see much more fraud activity—than card-present transactions.
Fraudsters were 81 percent more likely to carry out a card-not-present attack as opposed to a card-present attack at a point-of-sale. That’s according to a 2017 study, and the problem’s only gotten worse since then. Of course, it’s no surprise criminals prefer the card-not-present environment: there’s less immediate risk, and it’s harder to identify an attack.
The numbers are staggering: all totaled, fraud losses came to nearly $21 billion in 2018, according to eNett’s data. In fact, OTAs (online travel agencies) alone suffered $11 billion in losses. And the data suggests that the situation is only going to become more dire, with fraud losses in the travel industry projected to exceed $25 billion in 2020.
That said, direct fraud costs in 2018 came to only $6 billion. While that’s certainly a cause for concern, it’s barely one-quarter of the total fraud losses. So, to what can we attribute the remaining $15 billion in losses?
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Direct vs. Indirect Fraud Costs
Direct loss of revenue is just one aspect of the fraud problem. As we noted above, the indirect costs of fraud are approximately 150% greater than the value of direct losses.
Fraud is like the proverbial iceberg: you only see a small part of it on the surface. It’s the ancillary losses occurring as a result of fraud that really take their toll on your bottom line. These include:
- Lost Goods/Services: Whether it’s a seat, a hotel room, or goods purchased in-flight, you can’t resell goods or services that are purchased fraudulently.
- Added Fees: To add insult to injury, your acquirer will typically apply a chargeback fee to cover the cost of processing a chargeback resulting from criminal fraud.
- Reputational Damage: These attacks can add up, collectively giving the impression that you’re fraud-prone. As a result, banks may be slack in performing due diligence during future disputes.
- Increased Overhead: Roughly 2-3% of all transactions processed in the travel space must be sent to fraud teams for manual review, costing additional time and revenue.
- Increased Chargeback Rates: Every dispute impacts your chargeback-to-transaction ratio—even if you ultimately win the dispute.
- Threats to Long-Term Sustainability: If your chargeback ratio approaches established dispute thresholds, your acquirer might freeze or even cancel your account, rendering you unable to process card payments.
Based on a survey of over 400 merchants, the report presents a comprehensive, cross-vertical look at the current state of chargebacks and chargeback management.Access the FREE Report
The Top 4 Travel Fraud Threats
The consequences of fraud can vary, from increasing your costs to potentially destroying your business. With that in mind, let’s examine the top four fraud threats facing travel merchants, and what you can do about them.
Long-term, Fraud-free Strategies
Developing a viable, actionable plan to manage fraud isn’t easy, especially when the fraud comes from multiple sources. Nevertheless, it’s a vital component of business management, and calls for a multilayer strategy capable of taking on both pre- and post-transactional fraud threats.
The good news is that you don’t have to go it alone. Click below to learn how we can help you start preventing criminal fraud and fighting back against chargeback abuse today.