FRAUD MANAGEMENT
BENCHMARK STUDY
WELCOME TO THE
CYBERSOURCE FRAUD MANAGEMENT
BENCHMARK STUDY, AIRLINE INDUSTRY
EDITION 2014
Travel commerce has been changing at a faster pace than ever before. Today, both
corporate and leisure travelers are truly connected, with thousands of travel agencies,
wholesalers and suppliers within fast reach, anywhere in the world. Travelers are
looking for a fast, safe and seamless travel buying experience, irrespective of device
or location.
Our latest benchmark study reflects this evolution we focus on providing you with
the tools and insight to service your customers and accept more bookings, faster and
more profitably.
We have commissioned this study conducted by PhoCusWright Inc., to help you
assess fraud management operating performance and understand industry trends
and best practices.
Whether you are an airline, travel agency, tour operator, hotel, rail operator, cruise
line, car rental agency or another travel industry business, we trust you will find the
study beneficial.
We look forward to discussing how CyberSource solutions can help you optimize
fraud management operations.
The CyberSource Team
Page 2
CONTENTS
02
04
INTRODUCTION
07
09
05
05
07
Payment Methods
09
11
12
15
16
17
19
19
19
20
1. A World of Data
19
2. A World of Analytics
19
3. A World of Expertise
4. One Platform
Page 3
INTRODUCTION
Online travel has certainly come a long way. From its humble beginnings, when
a handful of pathbreaking agencies began selling air tickets via the still-nascent
Internet, to what now represents a substantial portion of leisure and business travel
sales worldwide, online travel continues to shape and reshape how travelers and
the global travel industry interact.
Figure 1
2009 2012
Europe
31% 41%
United States
39%
42%
Asia Pacific
18%
24%
Eastern Europe
11%
19%
Latin America
11%
21%
Middle East
9%
18%
Page 4
AIRLINE RESPONDENTS
BY TYPE
2%
24%
Figure 3
74%
Full-fare / traditional network airline
33%
Asia Pacific
Low-cost airline
Business class airline only
Question: Which of the following best
describes your airline or company?
Base: Airline companies (N=92)
Source: CyberSource Fraud Management
Benchmark Study, Airline Industry
Edition 2014
22%
Europe
12
Americas
Europe
Asia Pacific
15%
Middle East
Middle East
& Africa
15
12%
Africa
North America
South/Central
America and
Caribbean
10%
9%
3
4
5
19
Full-fare
10
LCC
Page 5
Figure 4
6% LATAM
33%
27%
APAC
U.S.
Figure 5
5%
37
14%
$5B to $9.9B
Do not know
$1B+
<$1B
20%
$1B to $4.9B
$15B or greater
12
10%
$500 to $999M
$10B to $14.9B
Do not know
17%
$100 to $499M
4%
19
9%
21%
Full-fare
10
LCC
Question: What was your airlines total revenue for 2012 (inclusive of all sales channels)?
Base: Airline companies (N=90)
Source: CyberSource Fraud Management Benchmark Study, Airline Industry Edition 2014
Page 6
Figure 6
2010 2012
Travel Agency
47%
45%
16%
OTA
10%
10%
Airline Website
26%
29%
Figure 7
60%
21%
2%
2%
8%
10%
7%
Low-cost
10%
Full-fare
10%
13%
13%
45%
U.S. Online Travel Overview Thirteenth Edition, PhoCusWright (November 2013); European Online Travel Overview Ninth Edition, PhoCusWright (December 2013);
Asia Pacific Online Travel Overview Sixth Edition, PhoCusWright (October 2013).
Page 7
PAYMENT METHODS
As the role of direct sales channels in overall airline distribution increases, airlines
take on more responsibility for payment acceptance and fraud management.
Airlines today accept a wide variety of payment
methods, subject to the market conditions and
consumer needs across the various countries in
which they operate. Credit and debit cards are
the most widely accepted form of payment across
almost all airlines and regions, given the global
nature of the industry (see Figure 8).
Figure 8
Worldwide
credit/debit/T&E cards
23%
UATP
50%
32%
Bank transfers
18%
44%
36%
38%
Cash on delivery
27%
23%
Electronic check,
ACH or direct debit
Gift cards/certificates/other
prepaid card
16%
3%
9%
34%
34%
23%
18%
16%
46%
Low-cost
Full-fare
Page 8
22%
9%
8%
6%
1%
Call center
23%
37%
13%
10%
12% 5%
Travel agency
15%
14%
30%
26%
5%
9%
Mobile device
3%
14%
15%
20%
21%
27%
10%
18%
28%
24%
16%
Airport kiosk
3%
14%
15%
30%
36%
1%
Highest incidence
2nd
3rd
4th
5th
Lowest incidence
Question: Please rank the following sales channels in terms of the incidence of fraudulent bookings occurring through each channel, with 1 having the highest
incidence of fraud and 6 the lowest. (If your airline does not support a particular sales channel, please assign it the lowest rank for fraud incidence.)
Base: Airline companies (Low-cost airlines, N=22; Full-fare airlines, N=68)
Source: CyberSource Fraud Management Benchmark Study, Airline Industry Edition 2014
Page 9
66%
55%
27%
28%
28%
22%
5%
18%
59%
50%
36%
Low-cost
Full-fare
14%
13%
Question: Which of the following would you consider your organizations top priorities with regard to managing payment fraud? Select up to three.
Base: Airline companies (N=92)
Source: CyberSource Fraud Management Benchmark Study, Airline Industry Edition 2014
Page 10
1.2%
Mobile
1.7%
3.4%
Page 11
8%
13%
7%
17%
17%
33%
21%
42%
25%
42%
23%
47%
27%
47%
28%
62%
32%
60%
Biometric indicators
5%
30%
65%
30%
65%
Currently use
Plan to implement
Question: Which fraud detection techniques/services does your airline use or plan to implement to assess the risk of payment fraud for bookings made on your airlines
direct sales channels? If your airline does not currently use or plan to implement any of the following, please leave blank.
Base: Airline companies (Currently in use: N=33-80)
Source: CyberSource Fraud Management Benchmark Study, Airline Industry Edition 2014
Page 12
Figure 12b
12%
29%
Proprietary Data /
Customer History
59%
14%
27%
Positive lists
59%
13%
28%
10%
18%
Purchase
Device Tracking
15%
34%
IP geolocation information
66%
12%
22%
Device fingerprinting
(e.g., electronic fingerprinting of PC or mobile device/network route)
27%
Currently use
30%
Plan to implement
43%
Question: Which fraud detection techniques/services does your airline use or plan to implement to assess the risk of payment fraud for bookings made on your airlines
direct sales channels? If your airline does not currently use or plan to implement any of the following, please leave blank.
Base: Airline companies (Currently in use: N=33-80)
Source: CyberSource Fraud Management Benchmark Study, Airline Industry Edition 2014
Page 13
Figure 12c
Multi-merchant Data /
Purchase History
47%
33%
Third-Party
Outsourcing
20%
27%
48%
Currently use
23%
Plan to implement
34%
Question: Which fraud detection techniques/services does your airline use or plan to implement to assess the risk of payment fraud for bookings made on your airlines
direct sales channels? If your airline does not currently use or plan to implement any of the following, please leave blank.
Base: Airline companies (Currently in use: N=33-80)
Source: CyberSource Fraud Management Benchmark Study, Airline Industry Edition 2014
Page 14
27%
of airline direct bookings
require manual review*
*32% of respondents
do not track or do not know
62%
of bookings sent for review
are ultimately accepted
In spite of the various checks and balances currently in place to deter fraud, manual
review of suspicious bookings remains a significant part of the payment management
process for most airlines. Nearly three in five airlines review bookings manually, and
on average, more than one in four transactions (27%) are manually reviewed for
payment fraud.
Airlines in emerging online markets such as Asia
Pacific, the Middle East and Africa are more likely
to conduct manual reviews than their counterparts
in Europe and North America. This likely reflects the
greater deployment of fraud detection systems by
points of sale in emerging markets, as well as sellers
higher concern about fraud. There is also significant
variation by the size of the airline. Larger carriers
with revenue in excess of $10B conduct manual
reviews for 5% of direct bookings on average, while
the percentage of bookings that undergo manual
review at airlines with less than $1B in revenue is
significantly greater.
On average, a manual review takes just under
nine minutes; full-service carriers take longer
(10 minutes) than LCCs (under five minutes) to
authenticate or reject suspicious bookings. In terms
of cost, managing fraud including staff, systems
and tools accounted for 0.1% of airline revenue.
Airlines may take a range of actions once booking
fraud is detected or suspected. The most common
step is to simply cancel the booking. Nearly nine
out of 10 airlines reject bookings upon detection of
potential fraud (see Figure 13). Airlines may also
Figure 13
87%
58%
54%
48%
41%
33%
25%
Page 15
SIGNIFICANCE OF FRAUD
IN LOYALTY PROGRAMS
Do not
know/have
not tracked
19%
Very significant
(it is a major
problem)
7%
31%
43%
Not significant
(there is no or
negligible fraud within
our loyalty program)
Somewhat
significant
Figure 15
49%
39%
23%
22%
22%
Question: Which of the following types of frequent flier fraud are the most common? Select up to three.
Base: Airline companies (N=90)
Source: CyberSource Fraud Management Benchmark Study, Airline Industry Edition 2014
Page 16
2012
Eastern Europe
43%
Europe 38%
Middle East
38%
United States
36%
Latin America
34%
Asia Pacific
33%
Figure 17
Credit cards
83%
40%
Cash
Debit cards
42%
Virtual cards
20%
60%
29%
37%
42%
EFT
Online alternatives
63%
29%
31%
Check
COD
92%
8%
16%
21%
25%
Developed
Developing
Developed: North America, Western Europe, Australia/New Zealand. Developing: Asia, Africa, Eastern Europe, Latin America.
Base: OTAs in developed markets (N=52); OTAs in developing markets (N=64)
Source: PhoCusWrights Payment Unsettled: Cost, Opportunity and Disruption in Travels Complex Payment Landscape
Page 17
Payment Unsettled: Cost, Opportunity and Disruption in Travels Complex Payment Landscape, PhoCusWright (October 2013).
Page 18
2. A WORLD OF ANALYTICS
Effective fraud screening strategies require the
ability to analyze and act on data insights quickly.
Decision Manager comes with eleven regional and
industry risk models, used in conjunction with over
260 detector tests, to screen every order for global
3. A WORLD OF EXPERTISE
Constantly changing fraud schemes and business
conditions require vigilance and expertise in
managing fraud operations. CyberSource maintains
risk experts on six continents. With this global
knowledge network, our team works to identify new
4. ONE PLATFORM
Fraud detection is an integral part of your payment
management operations. A single connection to
our cloud-based platform enables you to safely
accept payments across multiple sales channels,
worldwide. Integrated payment, fraud and security
Page 19
Orders
1
Mobile
Kiosk
eCommerce
POS
Accept
Fraud
Reject
3
Call Center
4
2 Rules Engine
1 Detection Radar
MANAGED
RISK
SERVICES
Expertise
CyberSource has one of the largest Managed Risk Analysts team worldwide.
With over 450 years of combined industry experience in fraud management, our
Analysts collectively share their expertise to proactively set strategies in place to
prevent fraud from affecting your business.
Custom
Analysis
Global
Knowledgebase
Our Managed Risk team serves hundreds of clients worldwide with Risk Analysts
located on six continents. With CyberSource, youre tapped into a rich, global
knowledge base of Analysts that understand and proactively defend your business
from multiple and varying fraud threats.
Ongoing
Tuning
Our Analysts constantly monitor and tune your fraud management system and
coordinate with other departments of your organization to maximize revenue and
reduce overhead, while maintaining a positive customer experience.
Page 20
ABOUT CYBERSOURCE
CyberSource is a payment management company
that provides a complete portfolio of services
that simplify and automate payment operations.
Customers use our solutions to process online
payments, streamline fraud management, and
simplify payment security.
Born during the dawn of eCommerce in 1994,
CyberSource was one of the pioneers in online
payment and fraud management services for
medium and large-sized merchants. In 2007, we
acquired the leading U.S. small business payment
services provider, Authorize.Net, thus expanding our
market footprint to cover businesses ranging from
ABOUT PHOCUSWRIGHT
PhoCusWright is the travel industry research
authority on how travelers, suppliers and
intermediaries connect. Independent, rigorous
and unbiased, PhoCusWright fosters smart
strategic planning, tactical decision-making and
organizational effectiveness.
PhoCusWright delivers qualitative and quantitative
research on the evolving dynamics that influence
travel, tourism and hospitality distribution. Our
marketplace intelligence is the industry standard
for segmentation, sizing, forecasting, trends,
analysis and consumer travel planning behavior.
Every day around the world, senior executives,
marketers, strategists and research professionals
from all segments of the industry value chain use
PhoCusWright research for competitive advantage.
CONTACT
CYBERSOURCE
NORTH AMERICA
ASIA PACIFIC
Singapore
t. +800 6363 083 (Singapore)
t. +1800 816 575 (Malaysia)
t. +1800 8756 8388 (Philippines-Globe)
t. +1800 10 802 7222 (Philippines-PLDT)
e. ap_enquiries@cybersource.com
JAPAN
Tokyo, Japan
t. +81 3 3548 9873
e. sales@cybersource.co.jp