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Airlines lose USD 1.4 billion to online payment fraud in 2010 - survey

Thursday 19 May 2011 | 11:39 AM CET

Airline companies have lost almost USD 1.4 billion due to online payment fraud in 2010, a recent report has revealed.

Nevertheless, online fraud loss rates for the airlines have decreased by 31 percent since 2008, according to the same report, dubbed “Airline Online Fraud Report”, which was released by US payment services provider CyberSource.

According to the survey, when it comes to online payment fraud, the airlines` online sales experience levels are relevant. Thus, airlines with less than 3 years of online selling experience have recorded higher fraud loss rates in 2010 (1.7 percent of website revenue lost to online fraud) as compared to the companies with more than 10 years of online selling experience which have registered 0.5 percent revenue losses in 2010.

Moreover, the report unveils that airlines with more than 10 years of online selling experience manually review 15 percent of their bookings while those with less than 3 years of experience review 53 percent of their bookings. Survey data also indicates that 26 percent of online bookings require additional manual review. However, 20 percent of the airlines do not conduct manual review at all.

In 2010, airlines reported that on average, for every fraudulent website booking, they rejected an additional 5.1 bookings due to suspicion of fraud. Furthermore, the average online booking reject rate was 3.3 percent, as compared to 2.8 percent in the previous survey. Over a quarter of the surveyed airlines reported their online booking reject rates to be more than 5 percent.

As far as the number of fraud detection tools is concerned, airlines with less than 3 years of online selling experience have used 6.4 fraud tools as compared to the airlines with more than 10 years of online selling experience which have used 7.8 fraud tools in 2010.

Despite the fact that the card verification number (CVN) is the most effective fraud detection tool, the survey indicates that only 24 percent of the airlines utilise it.

The study also highlights that airlines are slow to deploy the latest anti-fraud tools, with only 3 percent using public record searches to validate bookings. 1 in 5 surveyed airlines plan to implement device fingerprinting in 2011, while over two-thirds of airlines intend to adopt one or more new fraud detection tools in 2011.

The survey has been conducted in collaboration with Airline Information and includes airlines from across of the globe, representing an estimated 40 percent of total worldwide online sales.

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