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False Positives Create a Real Problem for Online Travel Businesses

posted on: Mon Jun 26 2017

Summer is here and the temperatures are heating up, and, consequently, so are sales in the travel and leisure industry. The good news?Online Travel

The not-so-good news? These numbers could have been even higher. How so? Here’s a little secret that’s not so secret in the travel and leisure world: decline rates for eCommerce transactions can be as high as 33%, indicating excessive false positives across the board. Increase the record-breaking numbers quoted above by 33% (i.e., no false positives) and the projections might have looked like this: 

  • Daily air passenger counts could have been 825,000 higher, reaching $3.325. million
  • Hotel stays could have been 33% higher for a nearly 2.8% increase.

In fact, Flight Global observes that many Tier-2 air carriers in Europe are turning away valid orders in an effort to avoid fraud.

Further, a recent Javelin study found that at least 15% of all cardholders have had at least one transaction incorrectly declined, which represents annual revenue losses totaling nearly $118 billion. While the study was not specific to the travel and leisure industries, the fact that travel is the #2 most popular online shopping category indicates that it accounts for a large portion of this $118 billion “revenue gap.”

So why are airlines, hotels, and online travel marketplaces (OTA’s) turning down so much business? Fear of fraud.

Fortunately, dramatic improvements in fraud prevention and declining costs for enterprise-class anti-fraud solutions make it possible for travel and leisure online businesses to overcome the issue of false positives. For example, one of Kount’s customers, webjet.com.au, was able to increase orders accepted by 116% while reducing chargebacks by 98% (compared to the Australian Online Travel Services 1.9% chargeback benchmark).

No matter what fraud prevention provider you choose, industry analysts agree that a multilayered approach that delivers key strategic capabilities is the best path to boosting sales and beating fraud:

  1. Advanced screening technologies. Technologies like Device Fingerprinting, Geo-Location, Proxy Piercing, etc.—integrated at the code level and analyzing data in real-time—provide a first line of defense against fraud. Using them, travel and leisure industry companies can know that the buyer is who they say they are, is where they say they are, and is using the accounts they’re entitled to use in a legitimate manner. Just as importantly, using advanced screening technologies also makes it more likely to confirm legitimate transactions, even if at first they appear to be suspicious.
  2. Artificial Intelligence and Machine Learning. Computers have unlimited capacity (speed and memory) for finding the patterns that reveal the suspicious fraud “needles” worthy of greater scrutiny in an ever-expanding haystack of transactions...while avoiding the false positives that cause unnecessary rejections or reviews.
  3. Order Linking. Fraudsters often use multiple credit cards and devices to make dozens or even hundreds of fraudulent bookings. Then they’ll execute multiple booking changes in an attempt to overwhelm fraud prevention systems and hide their fraud under an avalanche of ever-shifting transactions. Order Linking finds the hidden attributes behind multiple transactions originating from the same fraudster or criminal network. Whether it’s credit card accounts, IP addresses, geo-locations, device fingerprints, etc., this deep linking technology reveals dark connections and stops the fraud cold. The flip side of Order Linking is that it can also be quite effective at confirming when orders are legitimate, thus avoiding false positives.
  4. Dynamic scoring and rescoring. What if you could continue to follow the activity of a credit card after initial approval? What if—after that first, ostensibly innocent transaction—it made fraudulent purchase after fraudulent purchase in the ensuing hours and revealed itself as stolen? That’s the concept behind dynamic scoring and rescoring. And not only is it a powerful tool for stopping fraud, but it also enables more approvals of borderline orders (knowing you can “go back” and retroactively cancel bookings when they reveal themselves as fraudulent) which helps reduce false positives.
  5. Mobile-optimized screening and rules. Nearly 4 in 10 global travelers shop for travel on mobile devices and approximately 33% of them complete their bookings using mobile. It is absolutely essential that travel and leisure businesses are able to detect the unique signals of mobile fraud. Further, they need to be able to set mobile-specific rules that help minimize false positives and manual reviews.
  6. Statistical rules engine. Quantifying the risk associated with every transaction allows travel and leisure industry companies to fine tune decisions so that the revenue generated or losses incurred by borderline bookings consistently outperform the revenue missed or losses avoided by declining them. This enables a bias towards approving borderline transactions that dramatically reduces the number of false positives and manual reviews.
  7. Business Intelligence Reporting. Transaction data specific to your travel and leisure company also reveals trends unique to your business. The ability to meld this local, merchant-specific data with global, Big Data from around the eCommerce world is critical to helping avoid false positives, reduce manual reviews, and reduce fraud losses.

Want to know more about the top fraud challenges affecting the travel and leisure industry—like false positives—and how travel and leisure companies can better address them? Download the eBook “Fraud Takes Off In The Travel And Leisure Industry.”