Airlines Post Two-Year Drop in Credit Card Fraud

Online fraud costs the airline industry $1.4 billion a year. Although it is still a huge number, airlines have been fighting back and making some headway. A survey conducted by CyberSource Corp., a unit of Visa, Inc., showed that online fraud for airlines dropped 31% between early 2009 and 2011.

How the Fraud Occurs

In a typical scam, the fraudster will entice an unsuspecting consumer to purchase a deeply-discounted ticket online. He will then use an illegally-obtained credit card number and other personal information to book a full-price ticket in that consumer's name. The scam artist delivers the ticket to the customer and receives a cash payment in return for his “work.”

The fraud protection techniques that airlines are employing are helping to reduce the problem but more needs to be done.

How Airlines Fight the Fraud

One of the primary tools aiding the airlines in stopping the online fraud is the use of online fraud detection tools such as automated screening. In addition to screening, airlines are also rejecting transactions that are suspicious.

Experience, or how long the airlines have been selling tickets online, also seems to play a role in the airline’s ability to fight fraud. According to the CyberSource survey, those airlines that have been selling tickets online for less than three years have higher fraud loss rates than those that have been allowing online ticket booking for over three years. The less experienced airlines also have higher manual review rates and rejection rates than the more experienced airlines.

Airlines that have been offering online booking for over 10 years only have a 15% manual review rate on its online bookings. Airlines that have been allowing online booking for three years or less have a 53% manual review rate.

The CyberSource survey wasconducted between November 2010 and January 2011 and reflected the results of airline carriers with $62 billion in online sales, or around 40% of all online carrier revenue.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.