Fraud MGMT Benchmark Study Travel Edition 2014 PDF

CYBERSOURCE
FRAUD MANAGEMENT
BENCHMARK STUDY
AIRLINE INDUSTRY EDITION 2014
WRITTEN AND RESEARCHED BY

JULIEN BERESFORD,
CHETAN KAPOOR
AND DOUGLAS QUINBY
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
Fraud Management Benchmark Study, Airline Industry Edition 2014
Page 2
CONTENTS
02
CYBERSOURCE FRAUD MANAGEMENT BENCHMARK STUDY, AIRLINE INDUSTRY EDITION 2014
04
INTRODUCTION
07
09
05
Purpose of the Study and Methodology
05
Sample and Segmentation
AIRLINE DISTRIBUTION AND PAYMENTS

07
Global Airline Trends by Sales Channel
07
Payment Methods
AIRLINES AND PAYMENT FRAUD
09
Fraud by Distribution Channel

10
Fraud Management Priorities
11
12
15
Fraud Detection Techniques
Fraud Prevention Methods
16
AIRLINE LOYALTY PROGRAMS AND FRAUD
17
ONLINE TRAVEL AGENCIES AND FRAUD
19
CYBERSOURCE FRAUD MANAGEMENT FOR THE TRAVEL INDUSTRY
19
19
20
Fraud-Related Revenue Loss
1. A World of Data
19
2. A World of Analytics
19
3. A World of Expertise
4. One Platform
CYBERSOURCE DECISION MANAGER
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
Online penetration of total

travel markets by region,
2009 & 2012

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%
Source: PhoCusWright Inc.
Online channels which include the websites of

travel suppliers such as airlines, hotels, cruise lines
and car rental and rail companies, as well as online
travel agencies (OTAs) account for nearly one
third of all travel sales worldwide, and continue to
grow faster than the total travel market. Aggregate
worldwide online leisure and unmanaged business
travel gross bookings comprising Asia Pacific,
Western and Eastern Europe, Latin America, the
Middle East and the United States reached
US$369B in 2012, representing 32% of the global
travel market.
The remarkable rise of online travel over the past

two decades has brought many benefits to travel
companies and travelers alike, but it has also
introduced plenty of challenges. Not the least of
these is payment handling and fraud management.
The advent of eCommerce has demanded new
technologies and practices to mitigate the threat
of credit card fraud. In many emerging markets,
where credit card adoption is still relatively low,
eCommerce has challenged travel sellers to offer
alternative methods of payment and support various
fraud detection techniques across these methods.
But the online travel market differs widely by

geography, reflecting the varying degrees of maturity
in developed versus emerging market regions.
Europe is the worlds biggest regional online travel
market, with gross bookings of $127.9B in 2012,
but the U.S. has the highest online penetration
of its total travel market at 42% (see Figure 1).
Online penetration in other regions is comparatively
low between 18% and 24% but is growing at
a much faster pace as the less mature markets in
Asia Pacific, Eastern Europe, Latin America and the
Middle East catch up to Europe and North America.
The accelerating growth of mobile channels for

shopping and booking adds further complexity. By
2015, smartphone and tablet bookings will account
for nearly $40B in travel sales in the U.S. alone1.
Across nearly all global markets, mobile channels
are growing each year. The proliferation of mobile
commerce will require new solutions for mobile
payment and fraud protection.
Suppliers and intermediaries must keep abreast of
key market trends in travel booking, payment, and
fraud management to minimize the impact of lost
sales while providing a positive shopping experience
for customers in a highly competitive marketplace.
U.S. Online Travel Overview Thirteenth Edition, PhoCusWright (November 2013).
Page 4
PURPOSE OF THE STUDY AND METHODOLOGY

CyberSource commissioned PhoCusWright to conduct a global study of fraud
management practices across airlines and OTAs. The objective of this study is to
benchmark global metrics and trends in fraud management and protection across
airlines and OTAs. This study also explores supplier and online agency awareness
of various fraud-related issues, and examines travel providers approaches to and
implementation of fraud management tools and services.
PhoCusWright fielded an online survey between June
and August 2013 to airline payment fraud managers
through CyberSource and Airline Information.
Qualified respondents were required to have worked
in a payment and fraud management role at a
commercial passenger airline or independent airline
loyalty program. PhoCusWright received 92 qualified
responses from airlines, and nine responses from

independent airline loyalty programs.
PhoCusWright also conducted interviews with global
and regional OTAs in the U.S., Europe and Asia
Pacific to understand OTA priorities and practices
regarding fraud management.
SAMPLE AND SEGMENTATION

From consolidation in the U.S. to the explosive growth of low-cost carriers (LCCs)
in Asia, the commercial aviation industry is complex, competitive and in a constant
stage of change. Among the several hundred commercial carriers worldwide, legacy
airlines dominate global supply and traffic, while LCCs outperform in aggregate. The
sample from this study is broadly reflective of the global mix of network and low-cost
carriers and geographic regions.
Figure 2
AIRLINE RESPONDENTS
BY TYPE
2%
24%
Of the 92 airlines that participated in this survey,

network carriers represented 74%, while LCCs
and business class-only airlines accounted for the
rest (see Figure 2). One third of respondents are
headquartered in Asia Pacific (APAC), followed by
Europe (22%), the Middle East (15%) and Africa
(12%) (see Figure 3). North Americas share of

participating airlines is low (10%), due to the
consolidation that has transformed the U.S. aviation
market over the past two decades. By comparison,
almost half of LCC respondents are based in APAC,
reflecting the regions fragmented airline market.
Figure 3
74%
Full-fare / traditional network airline
AIRLINE RESPONDENTS BY REGION AND TYPE

22
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
Question: In which region is your airline headquartered?

Source: CyberSource Fraud Management Benchmark Study, Airline Industry Edition 2014
Page 5
Figure 4
GLOBAL* AIRLINE PASSENGER

REVENUE BY REGION
(US$B), 2012
Eastern Europe 7%
6% LATAM
33%
27%
APAC
U.S.
27% Western Europe

*Canada, Middle East and Africa not included.
Source: PhoCusWrights Payment Unsettled:
Cost, Opportunity and Disruption in
Travels Complex Payment Landscape
It is no surprise that traditional network carriers

have been operating far longer. Three out of four
legacy carriers have been in operation for at least
two decades. This stands in stark contrast to 91% of
LCCs, which are generally younger and have been
operating for less than 20 years.
A majority of airlines surveyed are headquartered
in emerging markets, but more than half of global
airline revenue is derived from developed regions.
Combined, North America and Europe accounted
for 54% of the global airline market in 2012 (see
Figure 4). However, on a stand-alone basis, APAC is
the largest airline market, comprising a third of total
airline passenger revenue worldwide.
Airlines come in all shapes and sizes: legacy,

low-cost, domestic, regional and global. The survey
sample is diverse and broadly representative of the
global commercial aviation marketplace. Nearly one
third of respondents represent an airline with less
than $1B in annual revenue, another third represent
airlines with between $1B and $10B (see Figure 5),
and 13% represent the largest carriers (with more
than $10B). One in five respondents either did not
know or declined to answer. As expected, traditional
airlines tend to be larger: 66% of network carrier
respondents report revenue of at least $1B (among
those who knew their airlines revenue figures),
versus 38% among respondents from LCCs.
Figure 5
AIRLINE RESPONDENTS BY ANNUAL REVENUE (US$)
Less than $100M
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)?
Page 6
AIRLINE DISTRIBUTION AND PAYMENTS

GLOBAL AIRLINE TRENDS BY SALES CHANNEL
Air is the largest travel segment worldwide, and perhaps the most advanced in online
distribution. Accounting for 43% of the U.S. travel market, 46% of the European
travel market, and 48% of the Asia Pacific travel market in 2012,2 the airline
industry was the first in travel to take up electronic distribution. It remains the most
penetrated online travel segment.
Figure 6
Global* Airline Passenger

Revenue by Channel (US$B),
2010 & 2012

2010 2012
Travel Agency
47%
45%
Direct Offline/Other 17%
16%
OTA
10%
10%
Airline Website
26%
29%
*Canada, Middle East and Africa not included.

Source: PhoCusWrights Payment Unsettled:
Cost, Opportunity and Disruption in
Travels Complex Payment Landscape
Online channels both airline websites and OTAs

accounted for 39% of global passenger revenue
in 2012, up from 36% in 2010 (see Figure 6).
This three-point shift, driven primarily by airlines
own websites, signifies the continuing changes
in distribution and customer buying behavior as
airlines relentlessly woo customers to book directly
online.
However, offline channels through intermediaries
still account for the majority of airline sales. In
2010, 47% of global airline revenue came through
traditional agencies. Another 17% came through
other offline sources, including booking with
suppliers directly (e.g., call centers, city offices and
airport ticket counters). Although travel agency sales
still dominate, agencies share of revenue dropped
to 45% in 2012 as customers migrated from offline

to online channels.
Distribution strategy and channel mix vary
significantly by airline type. LCCs have aggressively
pursued direct and online distribution to limit
third-party commissions and other expenses,
while network airlines have a legacy relationship
with traditional agencies and do more business in
the corporate travel market, where agencies play
a significant role. Among survey respondents,
supplier websites account for 60% of LCC revenue
and only 21% of full-service carrier revenue (see
Figure 7). By comparison, sales via travel agencies,
wholesalers and tour operators are still prominent
among traditional carriers. These sellers represent
an average of 45% of network carriers sales.
Figure 7
PASSENGER REVENUE BY SALES CHANNEL AND AIRLINE TYPE

Airline website
Mobile (websites/apps for
mobile phones or tablets)
Airline call center(s)
Airports
(ticket counters, kiosks, etc.)
Question: Please estimate the percentage of
passenger revenue booked through the following
sales channels for the full year 2012. Total should
equal 100%.
Base: Airline companies (Low-cost airlines, N=22;
Full-fare airlines, N=68)
Source: CyberSource Fraud Management Benchmark
Study, Airline Industry Edition 2014
Online travel agencies

Travel agencies, tour operators
and consolidators
60%
21%
2%
2%
8%
10%
7%
Low-cost
10%
Full-fare
10%
13%
13%
The emerging mobile channel (e.g., applications,

the mobile web) makes up the smallest piece of the
revenue pie for both types of airlines (2%). Despite
LCCs speedy growth, a considerable portion of
their revenue still comes from channels other than
45%
their websites and mobile offerings. Call centers,

kiosks, OTAs and traditional travel agencies each
represent somewhere between 7% and 13% of LCC
passenger revenue.
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).
The Universal Air Travel Plan (UATP), an

airline-issued charge card widely used within
managed corporate travel, is far more prominent
among full-service carriers, half of whom report
accepting UATP (compared to less than a quarter
of LCCs). This form of payment is extensively used
by North American (89%) and European (70%)
airlines.
Figure 8
ACCEPTED PAYMENT METHODS FOR DIRECT SALES CHANNELS BY AIRLINE TYPE

95%
97%
Worldwide
credit/debit/T&E cards
23%
UATP
50%
32%
Bank transfers
18%
Country- or region-specific cards
44%
36%
38%
Cash on delivery
27%
PayPal or other online wallets
Question: Which of the following payment options

does your airline currently accept for bookings
made on your direct sales channels (airline
website, call center, airport ticket counter, mobile,
etc.)? Select all that apply.
*Only four respondents for Western Union, spread
across all four regions.
Base: Airline companies (Low-cost airlines, N=22;
Full-fare airlines, N=68)
Edition 2014
23%
Electronic check,
ACH or direct debit
Gift cards/certificates/other
prepaid card
16%
3%
9%
Almost one in two traditional full-fare carriers accept

bank transfers and country- or region-specific cards
(e.g., Carte Bleue in France, UnionPay in China).
Incidence of acceptance for these payments is
especially high among airlines in South and Central
America, the Caribbean and Europe.
In emerging markets where Internet and credit card
penetration is relatively low, many travel companies
airlines included offer a range of payment
methods besides credit cards. Cash on delivery
(CoD) is one such method, wherein a transaction is
fulfilled by cash payments offline. CoD is accepted
by 36% of LCCs and 38% of full-service carriers,
34%
34%
23%
18%
16%
Mobile phone payment

Western Union*
46%
Low-cost
Full-fare
and is prominent primarily in Latin America and

Africa.
Payment methods specific to mobile devices,
such as bill-to-carrier and SMS authorization, rank
relatively low among both full-service carriers (16%)
and LCCs (18%). Across all regions, mobile-specific
payment methods comprise only a small share of
airline direct billings. But Africa appears to be an
interesting outlier region, in which a far greater
percentage of airlines (45%) accept mobile forms
of payment through popular SMS-based payment
methods such as M-Pesa.
Page 8
AIRLINES AND PAYMENT FRAUD

FRAUD BY DISTRIBUTION CHANNEL
With the dramatic growth of airline websites as a distribution channel and the
consequent need for risk management on these sites, it should come as little
surprise that airlines view their websites as the most fraud-targeted channel.
Three out of four airline respondents attribute the highest or second highest rate of
fraud incidence to their own websites, followed by call centers and travel agency
bookings (see Figure 9). Airlines rate airport kiosks as having the lowest incidence of
fraud among all points of sale.
Figure 9
AIRLINE SALES CHANNELS RANKED BY SHARE OF FRAUD INCIDENCE

Website via desktop computer
54%
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%
Airport ticket counter

3%
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)
Mobile channels rank low in terms of fraud

incidence relative to other channels, but these are
still early days for smartphones and tablets as points
of sale. As airlines continue to expand their mobile
offerings and consumers clamor for more mobile
devices, the mobile channel will almost certainly

become a bigger source of bookings and therefore
will also demand attention to fraud management
best practices.
Page 9
FRAUD MANAGEMENT PRIORITIES

Because airline websites account for a growing share of airline sales and are
the channel most targeted by fraudsters, airlines understandably see card fraud
mitigation and management as their top priorities in fraud management.
Both full-service carriers and LCCs consider managing card fraud from specific
geographic regions among their top fraud-related priorities (see Figure 10). Regions
(from which the card or booking originated) cited as the biggest sources of fraud
were Africa (72%) and North America (44%).
Figure 10
PRIORITIES IN MANAGING PAYMENT FRAUD, BY AIRLINE TYPE

41%
Card fraud in specific

geographic regions
66%
55%
Manual review and

processing of chargebacks
Rejection of "good" bookings
due to fraud detection
tools (false positives)
27%
28%
Conversion loss due

to additional payment
verification requirements
28%
Fraud via bookings

on mobile devices
Loyalty program fraud /
fraudulent redemption of miles
22%
5%
18%
59%
50%
36%
Low-cost
Full-fare
Fraud via airline ticket offices

or airport ticket counters
14%
13%
Question: Which of the following would you consider your organizations top priorities with regard to managing payment fraud? Select up to three.
Airlines also cite the operational efficiency of

manual reviews and processing chargebacks as
important priorities. The manual review rate for
LCCs is 55%. This is likely due to LCCs intense
focus on cost reduction and the direct bottom-line
impact of chargebacks, the associated fees, and the
indirect costs (staff time, manual procedures, etc.)
associated with handling them.
Another high priority for LCCs is improving website

conversion. Therefore, LCCs dislike any additional
security steps that cause friction and impact
website conversion. This is understandably a very
big concern for LCCs, which derive a much greater
share of their total revenue from their websites than
network carriers do.
Page 10
FRAUD-RELATED REVENUE LOSS

Payment-related fraud management presents a range of challenges to any business,
but the most substantial impact is revenue loss the bookings that are terminated
and the revenue that goes uncollected (or charged back) due to fraud.
Figure 11
Average Percent of Revenue

Lost Due to Fraud, by Direct
Sales
Channel

Website 1.1%
Call Center
1.2%
Mobile
1.7%
Question: What percent of revenue from your

direct sales channels (your airlines website,
call center, airport ticket counter, mobile, etc.)
did you lose due to payment fraud in the past
12 months?
Edition 2014
Of those respondents who were able or willing to

provide an estimate for revenue loss, the average
percent lost is 1.1% for websites, 1.2% for call
centers, and 1.7% for mobile channels
(see Figure 11). The revenue loss figure includes
rejected bookings, the value of fraud-coded
chargebacks, and credits issued to consumers to
avoid chargeback disputes.
However, the percentage of bookings that are

rejected or cancelled due to suspicion of fraud is
substantially greater: 3.4% of bookings on average
are rejected due to suspicion of payment fraud.
The percent of bookings rejected due to suspected
fraud is higher (exceeding 5%) among smaller
airlines (those with under $1B in annual revenue).
Among airlines whose revenue exceeds $1B, this
percentage is close to 2%.
3.4%
of airline bookings are rejected

or cancelled due to the
suspicion of fraud*
*44% of respondents do not track,
do not know, or declined to respond
Page 11
FRAUD DETECTION TECHNIQUES

Airlines take advantage of a variety of fraud detection technologies and services
to safeguard their business and protect customers from fraudulent payment.
The most widely used techniques include card verification numbers (CVN) at 79%
and payer authentication (i.e., 3D Secure) at 76% (see Figure 12a). One in two
airlines also use address verification service (AVS) checks supplied by card brands
during authorization; airlines in North and South America favor this tool more than
their counterparts in other regions. Seventeen percent of airlines driven by the
Middle Eastern carriers plan to implement AVS in the future.
Figure 12a
CURRENT AND FUTURE IMPLEMENTATION OF FRAUD DETECTION VALIDATION SERVICES BY AIRLINES

Card Verification Number
79%
8%
13%
Payer authentication (3D Secure)

76%
7%
17%
Address Verification Service

50%
17%
33%
Social networking sites

37%
21%
42%
25%
42%
Telephone number verification/reverse lookup

33%
Credit history check
30%
23%
47%
27%
47%
Postal address validation services

26%
Paid public records services
10%
28%
62%
Out-of-wallet or in-wallet challenge/response systems

8%
32%
60%
Biometric indicators
5%
30%
65%
Two-factor phone authentication

5%
30%
65%
Currently use
Plan to implement
Do not use/No plans
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)
Page 12
Verification through social networks has also gained

popularity among airlines. Some of the Internets
leading websites are social sites with millions of
active users. Despite the youth of social media
as a technology, there are already thousands of
success stories of enhanced pre-, in- and postflight customer experiences and increased traveler
engagement due to effective use of the platform.
Social media is a relatively new tool for tackling
fraud, but a combined 58% of airlines are either
already using or plan to have services that could
scan user profiles across social networking sites.
Loyalty program and repeat customers (traced

through IPs or log-ins) also aid airlines in limiting
fraud through analysis of historical purchase
habits and patterns. In light of the growing share of
transactions completed through direct channels
and companies increased access to consumer data
airlines and even card companies are creating
positive and negative lists of card numbers/users.
Up to three in four airlines use or have plans to
include these tools as part of their fraud detection
techniques (see Figure 12b). LCCs and network
airlines whose annual revenue is under $10B tend to
use these tools more than other carriers.
Figure 12b

Customer order history or frequent flyer membership history
59%
12%
29%
Fraud scoring model (company-specific)
Proprietary Data /
Customer History
59%
14%
27%
Positive lists
59%
13%
28%
Negative lists (in-house)

72%
10%
18%
Order velocity monitoring

51%
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%
Do not use/No plans
Page 13
Many airlines have in-house lists based on

their customer set, but services that aggregate
information about safe users and potentially
fraudulent ones are also offered by industry
associations (e.g., IATAs tool Perseuss). Nearly
half of airlines currently use shared lists, but an
additional one in five plan to use them in the future
(see Figure 12c).
Significant as well is the relatively widespread

adoption of multiservice solutions and vendors
that provide a range of fraud-screening techniques.
More than two in five airlines currently use a thirdparty provider of multiple services,
and another 23% indicate plans to begin working
with one.
Figure 12c

Shared negative lists / hot lists
Multi-merchant Data /
Purchase History
47%
33%
Multi-merchant purchase velocity / identity morphing models

25%
Third-Party
Outsourcing
20%
27%
48%
Third-party solution offering multiple services

43%
Currently use
23%
Plan to implement
34%
Do not use/No plans
Page 14
FRAUD PREVENTION METHODS
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
contact passengers for additional verification

58% of carriers allow customers to pay in person,
and 54% request additional proof of identity or
presentation of the payment card upon checkin. Depending on the gravity of the fraud, airlines
sometimes opt to work with local law and airport
enforcement agencies to apprehend the suspect.
Given the significant potential cost that payment
fraud presents to airlines, carriers are aggressive
in reviewing and addressing potentially
fraudulent transactions and rightly so. They
are also aggressive about disputing fraud-coded
chargebacks. On average, airlines dispute nearly
half (48%), and of those disputes, airlines win an
average of three in 10.
While online commerce may be mature in the travel
industry and for airlines in particular, payment
fraud management remains a critical aspect of
operations. The potential impact on revenue, costs
and staffing resources require airlines to pursue
new technologies and automation to address fraud,
especially as more and more transactions are
conducted online and via airline websites.
Figure 13
ACTION FOLLOWING POTENTIAL FRAUD DETECTION

Reject or cancel
the booking
87%
Allow the passenger

to pay face-to-face
58%
Request additional proof of ID

or presentation of payment
card used at check-in
54%
Request another payment type
48%
Wait at the airport

for the suspected criminal
prior to boarding
41%
Request additional proof

of ID before ticket issuance
Question: What does your airline do when a
potentially fraudulent booking is identified?
Edition 2014
Notify local law

enforcement agencies
of the suspected fraudster
33%
25%
Page 15
AIRLINE LOYALTY PROGRAMS AND FRAUD

As airlines seek to increase their volume of repeat customers and to derive more
revenue from each traveler, loyalty programs and frequent flier rewards have gained
importance. Loyalty programs, driven largely by full-service carriers, are offered
by 88% of airline respondents, and allow (frequent) travelers to accrue miles for
redemption. Opportunities for redemption are expanding as airlines are increasing
the range of third-party products and services they offer some through partnerships
with chain hotels, restaurants and retailers in addition to the redemption of miles
for flights and onboard perks.
Figure 14
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
Question: Please rate the significance of frequent

flier fraud within your airlines loyalty program.
Edition 2014
As a form of valuable currency, loyalty programs are

not immune to fraud attempts. Nearly two in five
airlines indicate that fraud in their loyalty program
is somewhat (31%) or very (7%) significant (see
Figure 14). Another 43% state that there is no
significant rate of fraud in their loyalty program,
while 19% do not know or do not track this. The
vast majority of airlines that do know about and
track fraud in their loyalty program report that
the actual monetary impact is not huge: 79% of
respondents said program fraud amounted to less
than $1M. Airlines based in North America and the
Middle East report a much higher average revenue
impact from program fraud.
Loyalty program fraud is still a relatively new
issue, but its importance is growing. More than
half of airlines (54%) use only internal tools and

procedures for fraud screening related to loyalty
programs, while 37% do no screening at all.
Currently, just 3% of respondents outsource loyalty
program fraud screening.
Among the most common types of fraud associated
with airline loyalty programs are miles/points
purchased with suspicious cards (49%) and account
theft (39%) (see Figure 15). Airlines are also wary
of points redemption by travel agencies, which
may charge either discounted or full ticket fees to
travelers. Another issue cited by more than one in
five airlines is the circumvention of frequent flier
program rules, such as travelers trying to combine
points from multiple programs for a single flight.
Figure 15
COMMON TYPES OF LOYALTY PROGRAM FRAUD

Points/miles purchased with fraudulent/stolen credit cards
49%
Loyalty account theft (where loyalty accounts are taken over

by someone other than the owner and mileage is redeemed)
Travel agents purchasing tickets for customers with agency
miles and charging the customer full or discounted fares
39%
23%
"Double-dipping": customers attempting to use points

or miles from more than one program for a single flight
22%
Fraud/misuse of accounts by airline staff
22%
Question: Which of the following types of frequent flier fraud are the most common? Select up to three.
Page 16
ONLINE TRAVEL AGENCIES AND FRAUD

Nearly two decades ago, the first of the OTAs Expedia, Travelocity and Preview
Travel forged a new path for travel shopping and booking. Today, OTAs around the
world are a major part of global travel distribution and constitute a significant portion
of online travel. In 2012, OTAs in the U.S., Europe and Asia Pacific accounted for
approximately $118B in gross travel bookings. Major global and local entities from
Ctrip in China and MakeMyTrip in India to global companies like Booking.com,
Expedia and Orbitz hold significant influence in their markets.
Figure 16
OTA Share of Online Leisure

and Unmanaged Business
Travel Market by Region, 2012

2012
Eastern Europe
43%
Europe 38%
Middle East
38%
United States
36%
Latin America
34%
Asia Pacific
33%
Source: PhoCusWright Inc.
OTA share of online travel markets worldwide varies,

but in no region is it below one third. OTA share
is 36% in the U.S., 34% in Latin America, 33%
in Asia Pacific, 38% in Western Europe and the
Middle East, and as high as 43% in Eastern Europe
(including Russia) (see Figure 16).
Given that online travel (and eCommerce in general)
originated in the U.S., where credit cards are a
long-established, common payment method for
consumers, credit card adoption is often cited as a
critical component in the development of a thriving
online marketplace. Cards are indeed
the most widely accepted form of payment by
OTAs and in some notable cases, such as Agoda
and Hotels.com, they are the only accepted form of

payment.
However, as OTAs expand their global footprint and
new players seek footing in emerging markets, OTAs
have begun to offer a range of alternative payment
methods to support the needs and practices of
consumers in different countries. The vast majority
of OTAs more than nine in 10 in developed
regions, and more than eight in 10 in developing
regions accept credit cards. But OTAs in emerging
market regions more commonly accept manual
forms of payment, such as cash and check, as well
as online alternatives such as PayPal and Alipay
(see Figure 17).
Figure 17
PAYMENT METHODS ACCEPTED BY OTAs, BY MARKET DEVELOPMENT
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
Because credit and debit cards are the most

widely used form of payment in a business model
almost completely dependent on online sales, OTAs
have a high risk of exposure to card fraud. OTAs
experience the highest percentage of payment fraud
of any travel segment on average, 1.2% of OTAs
online bookings are affected by card fraud3 and
card fraud is their biggest concern with regard to
payment processing and management.
Not surprisingly, interviews with leading global and

regional OTAs indicate that they use a variety of
fraud detection techniques and fraud prevention
services, such as address verification, card number
verification, public records checks, customer
purchase history checks, and third-party services
such as shared negative lists and fraud monitoring.
However, their business is completely dependent
on their website, and because conversion is the
most critical performance metric, OTAs are highly
sensitive to the potential negative impact of added
security measures.
Payment Unsettled: Cost, Opportunity and Disruption in Travels Complex Payment Landscape, PhoCusWright (October 2013).
Page 18
CYBERSOURCE FRAUD MANAGEMENT

FOR THE TRAVEL INDUSTRY
CyberSource Fraud Management Solutions, used with our powerful payment
management platform or as standalone service, are your single touch point to a
whole world of risk data intelligence, analytics customized to your region and to the
travel industry, and to risk experts on six continents.
The global strength of CyberSource helps you minimize payment risk,

accept more good orders, and grow your business faster.
1. A WORLD OF DATA
The more data you have, the better you can detect
patterns of good and bad behavior.
Decision Manager utilizes hundreds of data
elements in every risk assessment, including
insights derived from our merchant base and the
over 60 billion transactions that Visa Inc. and

CyberSource process annually in more than 200
countries and territories. With the Worlds Largest
Fraud Detection Radar, CyberSource helps you gain
greater accuracy, faster.
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
fraud trends identified by our system and risk

experts. Unique to CyberSource, Decision Manager
gives you specific reasons for each risk assessment,
allowing you to write more effective rules and make
better decisions.
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
fraud trends before they impact your business.

As your business expands to new geographies or
new channels such as mobile, you can count on
CyberSource to be your trusted partner.
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
management services speed time-to-market,

streamline operations and provide a centralized
view of transaction activity.
Safe and reliableCyberSource is a Visa Inc.
company.
Page 19
CYBERSOURCE DECISION MANAGER

The only fraud management platform with the Worlds Largest Fraud Detection Radar,
which increases fraud visibility over 200X, even for top merchants. Our risk models
include truth data from Visa Inc. and payment processors to improve accuracy on every
transaction. Decision Manager gives you the ability to customize rules and models to
your specific business, across all sales channels, including: web, mobile, call center,
kiosks. CyberSource Decision Manager works with any payment system.
Order
Disposition
Orders
1
Mobile
Kiosk
eCommerce
POS
Accept
Fraud
Reject
3
Call Center
4
2 Rules Engine
1 Detection Radar
Assess Orders in Real-time

Over 260 fraud detectors
Time-tested statistical risk models
Risk intelligence from global merchant base
Insights from over 60 billion transactions
that Visa Inc. and CyberSource process annually
3 Case Review Management
4 Tuning and Reporting
Make Better Decisions with

an Integrated Dashboard
Reasons for outsorting to manual review
3rd-party data verifications
Queue management optimization
Real-time management reports
MANAGED
RISK
SERVICES
Expertise
Fine-tune and Optimize Operations

in Near Real Time
Reports: financial impact, system reports, review team
Summary and transaction level detail
Passive rule testing
Data download for custom reporting
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
Analysis is a critical component of fraud management, required for understanding

how fraudsters circumvent your system, the effectiveness of your rules, and your
performance as it relates to your business objectives. Our experienced Analysts
know the types of analysis to perform, allowing you to gain insights and take
action more quickly.
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
Customize Your Risk Assessment

Use pre-loaded sample rules to get started
Build rules quickly with drop down menus
Combine rules in multiple ways
Customize the CyberSource risk score
Develop your own risk score with Score Builder
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
the smallest sole proprietorships to the largest global

brands. In 2010 CyberSource was acquired by, and
operates as a wholly-owned subsidiary of, Visa Inc.
Today, over 400,000 businesses worldwide
use CyberSource solutions. The company is
headquartered in Foster City, California, with regional
offices in Australia, Brazil, China, Japan, Mexico,
Singapore,United Arab Emirates and the United
Kingdom.
For more information, please visit
www.cybersource.com
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
To complement its primary research in North and

Latin America, Europe and Asia, PhoCusWright
produces several high-profile conferences in the
United States and Europe, and partners with
conferences in China and Singapore. Industry
leaders and company analysts bring this intelligence
to life by debating issues, sharing ideas and defining
the ever-evolving reality of travel commerce.
www.phocuswright.com
The company is headquartered in the United States
with Asia Pacific operations based in India and local
analysts on five continents.
PhoCusWright is a wholly owned subsidiary of
Northstar Travel Media, LLC.
NORTH AMERICA
LATIN AMERICA & THE CARIBBEAN
EUROPE, MIDDLE EAST & AFRICA
Foster City, CA, United States
Miami, FL, United States
Reading, United Kingdom
t. +1 888 330 2300

t. +1 650 432 7350
e. sales@cybersource.com
t. +1 305 328 1998

e. lac@cybersource.com
t. +44(0) 118 990 7300 (UK & Spain)

t. +33 170 98 32 20 (France)
t. +971 4 457 7200 (Middle East & North Africa)
t. +7 (495) 787 4140 (Russia)
t. +27 11 547 8463 (Sub-Saharan Africa)
e. europe@cybersource.com
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
2014 CyberSource Corporation. All rights reserved.
JAPAN
Tokyo, Japan
t. +81 3 3548 9873
e. sales@cybersource.co.jp

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CYBERSOURCE

AIRLINE INDUSTRY EDITION 2014

WRITTEN AND RESEARCHED BY

Fraud Management Benchmark Study, Airline Industry Edition 2014

CYBERSOURCE FRAUD MANAGEMENT BENCHMARK STUDY, AIRLINE INDUSTRY EDITION 2014

Purpose of the Study and Methodology

Sample and Segmentation

AIRLINE DISTRIBUTION AND PAYMENTS

Global Airline Trends by Sales Channel

AIRLINES AND PAYMENT FRAUD

Fraud by Distribution Channel

Fraud Management Priorities

Fraud Detection Techniques

Fraud Prevention Methods

AIRLINE LOYALTY PROGRAMS AND FRAUD

ONLINE TRAVEL AGENCIES AND FRAUD

CYBERSOURCE FRAUD MANAGEMENT FOR THE TRAVEL INDUSTRY

Fraud-Related Revenue Loss

CYBERSOURCE DECISION MANAGER

Fraud Management Benchmark Study, Airline Industry Edition 2014

Online penetration of total

Source: PhoCusWright Inc.

Online channels which include the websites of

The remarkable rise of online travel over the past

But the online travel market differs widely by

The accelerating growth of mobile channels for

U.S. Online Travel Overview Thirteenth Edition, PhoCusWright (November 2013).

Fraud Management Benchmark Study, Airline Industry Edition 2014

PURPOSE OF THE STUDY AND METHODOLOGY

responses from airlines, and nine responses from

SAMPLE AND SEGMENTATION

Of the 92 airlines that participated in this survey,

(12%) (see Figure 3). North Americas share of

AIRLINE RESPONDENTS BY REGION AND TYPE

Question: In which region is your airline headquartered?

Fraud Management Benchmark Study, Airline Industry Edition 2014

GLOBAL* AIRLINE PASSENGER

27% Western Europe

It is no surprise that traditional network carriers

Airlines come in all shapes and sizes: legacy,

AIRLINE RESPONDENTS BY ANNUAL REVENUE (US$)

Less than $100M

Fraud Management Benchmark Study, Airline Industry Edition 2014

AIRLINE DISTRIBUTION AND PAYMENTS

Global* Airline Passenger

Direct Offline/Other 17%

*Canada, Middle East and Africa not included.

Online channels both airline websites and OTAs

to 45% in 2012 as customers migrated from offline

PASSENGER REVENUE BY SALES CHANNEL AND AIRLINE TYPE

Online travel agencies

The emerging mobile channel (e.g., applications,

their websites and mobile offerings. Call centers,

Fraud Management Benchmark Study, Airline Industry Edition 2014

The Universal Air Travel Plan (UATP), an

ACCEPTED PAYMENT METHODS FOR DIRECT SALES CHANNELS BY AIRLINE TYPE

Country- or region-specific cards

PayPal or other online wallets

Question: Which of the following payment options

Almost one in two traditional full-fare carriers accept

Fraud Management Benchmark Study, Airline Industry Edition 2014

Mobile phone payment