Fraud in the airline industry was rampant even before the pandemic, but it has grown significantly since then. According to a Juniper report on online payment fraud growth from 2016 to 2020, an average fraudulent flight ticket purchase is above $1,900 — more than thrice higher than a legitimate one. This results in above $1 billion in losses due to fraud annually!
There are several factors that contribute to this situation:
- high volumes of orders through mobile applications
- high dependency on technology within airline companies
- an international audience of customers, making it harder to trace a fraudulent flight ticket order
Long story short, fraud in the airline industry mostly falls under the Card Not Present or CNP fraud category. This is where Covery’s expertise comes in handy. As an anti-fraud system operating in the USA, UK, France, and worldwide, Covery has a lot of aces up our sleeve when dealing with various CNP fraud types.
Types of fraud in the airline industry
The three most widespread fraud types that an airline company has to face are:
- friendly fraud and chargebacks on expensive flight tickets
- bonus abuse in Frequent Flyer Programs (FFP)
- account takeovers and sensitive data breaches.
The airline industry historically depends on booking sites, as customers prefer to book flight tickets, hotels, cars, and sightseeing services through one platform. Unfortunately, the booking industry has always slacked in terms of cybersecurity, so regular data breaches are not a secret there. This provides fraudsters with immense data arrays for phishing and account takeovers, which is especially dangerous for airline companies. Why so?
FFP participants often accrue huge volumes of unredeemed miles, and if fraudsters succeed in gaining unauthorized access to such accounts and request the airlines to redeem these bonuses — this can become quite a serious liability for the airline company. Thus said, ensuring the cybersecurity of databases and timely prevention of various types of CNP fraud and ATO attempts are essential for securing a healthy bottom line when fighting fraud in the airline industry.
What are the three major types of players in the airline industry?
As you well know, three key business models for an airline company are regional, national, and major.
- regional airlines serve minor flight directions in certain regions
- national airlines fly across the country and in nearby countries
- major airlines fly across the globe.
Many national and regional airlines operate under the branding of major airlines and sell flight tickets on their behalf. While this approach helps all parties involved, it also opens up a backdoor for fake airline companies. We are sure you know what these are, yes?
What are fake airlines?
These are fictional airline companies that do not actually have any planes and have never ever conducted a single flight. However, they market their services and sell tickets. What for?
- stealing PII like credit card details and emails during “payment attempts” at their websites. They might later try to abuse this information themselves or resell it on the Dark Web
- Up-selling actual tickets from a real airline company with a promise of discounts, special prices, and other bonuses. Once a fooled customer understands he/she was robbed, they start a chargeback — but the dispute is opened against the real airline company, not against a fake one.
Therefore, in-depth transaction monitoring in order to block risky payments is actually one of the best chargeback prevention methods. But how can airline companies achieve this result?
Combating fraud in the airline industry
Due to the fact that fraud in the airline industry is omnipresent, well-organized, and ever-growing in volume, the only way for an airline company to combat it is to actually prevent the possibility of accepting risky transactions. This means that by the time a fraudster tries to pay for a flight ticket, the company should know for sure that a fraud scheme is in progress and decline the payment.
How to make it possible? Major and national airline companies can invest resources in creating internal fraud prevention tools and anti-chargeback solutions. The problem with this approach is that custom solutions don’t scale well and can have integration issues with the rest of the software ecosystem used by the airline company.
This is why going for off-the-shelf or SaaS fraud prevention products like Covery remains the most preferable solution. Streamlined API integration enables quick and seamless addition of Covery to airline payment processing workflows. Immense experience in fighting CNP fraud ensures timely detection, alerting, and declining of risky transactions.
Covery comes with various tools for in-depth fraud prevention like automated KYC/AML checks, account takeover prevention, TrustChain reputational database, device fingerprinting, behavioral analysis, flexible rule-based risk logic engine, and Supervised Machine Learning algorithm. We have covered them all in detail in our previous articles and will not repeat them all again. After all — you can order a free demo and see for yourself how Covery works and what value it can drive for your company!
Fighting fraud in the airline industry is a neverending fight. However, with an anti-fraud tool like Covery, you can ensure this fight will not turn into a losing battle. Secure your revenues, minimize chargeback losses and ensure positive business outcomes with a reliable anti-fraud system!