Fraud is a pervasive problem in the travel industry, in particular for OTAs, with one report estimating that fraudsters are expected to cost the online giants $11 billion a year in 2020.
To help protect against fraud, OTAs have developed sophisticated methods of staying a step ahead of scammers, including investing in in-house fraud teams and partnering with third-party security firms.
According to payments company eNett International, a study conducted last year found that fraud costs travel intermediaries nearly $21 billion a year, an amount that the study found could increase 20% by 2020, exceeding $25 billion. OTAs are "expected to be the worst hit," eNett stated, with expected annual losses of $11 billion.
"It's a pretty significant issue," said Anuj Vohra, vice president of fraud prevention at Fareportal. "Fraud is everybody's problem. Unfortunately, none of us can stay away from it, and it's almost like the cost of doing business now."
Fareportal has made significant investments in fighting fraud, including running a 24/7 operation with more than 100 people dedicated to stopping scammers. Before humans get involved in determining if an attempted purchase is fraudulent, Fareportal has a number of safeguards set up to detect questionable transactions, including technology that leverages algorithms and machine learning to identify fraud, according to Vohra.
About 2% to 3% of all transactions will be sent to the fraud team, which will take a number of steps to verify a transaction, even calling a client and his or her bank.
Fareportal also employs a number of third-party companies.
"Fraud moves really quickly, and you have to be on top of it every single day, every single hour," Vohra said.
Forter, an e-commerce fraud-prevention company that works in a number of verticals including travel, recently announced a partnership with Priceline, using proprietary software to help reduce fraud and increase the rate of approved transactions.
Forter works with multiple retailers in and out of travel.
"We essentially enable the whole industry to come together and fight fraud as one unit or one coalition," said Michael Reitblat, Forter's CEO and co-founder. "If you're a fraudster, all you need to do is find something wrong or some vulnerability with one company, and you're in business."
Though that vulnerability often extends to other retailers, they are typically unwilling to share transaction and customer information with competitors, making it difficult to spot fraud, Reitblat said. But Forter is in a position to do just that, safeguarding about $100 billion in transactions annually across its various clients.
"When you can detect fraud faster and more effectively and more accurately, it means you can make it easier for everyone who is not a fraudster to transact," he said.
Reitblat said fraudsters in travel can be broken down into three main categories. The first are pranksters, people who try to get away with a one-time use of a stolen credit card to get a free airline ticket. While pranksters don't cause a lot of damage, there are a lot of them, he said.
The second are those who buy thousands of stolen credit cards and use them to buy tickets that they sell at a discount.
The most damaging group, he said, are "businesses that are built to steal money online." They have access to a lot of data and stolen information, and their purpose is to scale the fraud business.
Fareportal's Vohra said one of the biggest challenges in fighting fraud today is that fraudsters have embraced technology. They can be working in any part of the world. Data breaches have left quite a bit of customer data vulnerable, making it easier for scammers to find an opening.
"In my experience," Vohra said, "managing fraud is both an art and a science."