The travel industry is rebounding with a vengeance. Marking a substantial 31% increase in travel demand in March 2023 compared to the same period in 2019, the travel and tourism industry is estimated to reach $853.8 billion by the year-end of 2023. In fact, it is anticipated that online sales will contribute 74% of the total revenue by 2027.
But airplanes aren't the sole entities taking flight. Per TransUnion, travel industry fraud expanded by an overwhelming 156% in 2021. Without sophisticated travel fraud prevention measures, companies can lose up to $206 billion from 2021 to 2025.
The travel industry's characteristics, growth, and rapidly growing value substantially contribute to its appeal to cybercriminals, leading to increased fraud in the travel industry. A significant contributing factor is the large volume of money involved, often with high-value transactions. According to an Economist Intelligence Unit study, the global travel market is set to be worth a stunning $1.4 trillion in 2023. Substantial and frequent financial transactions catch the attention of fraudsters looking for big-time illegal gains.
Another reason for the prevalence of travel fraud is the amount of sensitive information. Fraudsters target valuable personal and financial information for misuse, including account takeovers and identity theft, to process online transactions. The travel industry's attractiveness to cybercriminals increases as data are frequently stored and used for recurring bookings, which further multiplies risk.
Commercial operations across borders lead to intricate transaction chains that are tough to manage and oversee, opening up ample possibilities for travel industry fraud. Companies often rely on intermediaries who may not have stringent security measures, further exacerbating the risk.
The rapid digital shift in the travel industry has laid bare vulnerabilities. As reported by Statista, the global online market size was $475 billion in 2022. This figure is forecasted to surpass $521 billion in 2023 and soar to $1 trillion by 2030. The uptick in online bookings, e-tickets, and virtual check-ins, has created more avenues for fraudsters to breach the system.
Travel fraud takes many forms, with the most typical being credit card fraud, identity theft, and fake travel agencies or listings:
Credit Card Fraud
Credit card fraud often involves unauthorized transactions, utilizing stolen card data for bookings. Card-not-present (CNP) fraud is an increasing concern, which occurs during online, over-the-phone, or mail transactions when the actual card isn't needed. Online ticketing and booking services are, therefore, hotbeds for CNP fraud.
This involves fraudsters securing personal information through hacking or phishing techniques. They use this information for numerous fraudulent activities, like securing flights, staying in hotels, or emptying reward points, all under someone else's name.
Account Takeover (ATO)
In this form of fraud in the travel industry, criminals gain access to a user's online account by acquiring login details through methods like phishing or data breaches. For travel, this can mean unauthorized access to travel itineraries, reward points, and other personal information stored within an account, leading to illegitimate transactions.
Scammers create fake websites, listings, and even travel apps, posing as legitimate agencies or rentals to deceive travelers into purchasing non-existent services. Fraudsters clone legitimate travel websites or create their own to offer too-good-to-be-true deals, capturing the victim's credit card information and personal data in the process.
App cloning is a relatively new form of travel fraud being adopted by experienced cybercriminals. Fraudsters create a replica of a genuine travel app, offering it to unsuspecting customers. Once downloaded, these rogue apps can be used to steal sensitive personal and financial information.
Bonus and Loyalty Abuse
Loyalty programs are designed to reward frequent customers with points that can be redeemed for various perks. However, fraudsters often manipulate these systems. They may create multiple fake accounts to gather sign-up bonuses or use stolen account credentials to drain someone else's earned points. According to a report in the New York Times, travel companies lose over $1 billion every year due to these activities.
Chargeback Fraud or "friendly fraud" happens when customers dispute a transaction with their credit card issuer, causing an immediate refund despite goods or services being delivered.
Preventing travel fraud isn't an easy task, but it's pivotal to maintaining industry growth and customer trust. The multifaceted nature of travel industry fraud necessitates a comprehensive approach to security and fraud prevention:
Review Policies in Handling Sensitive Information
On a broader level, it's pivotal to adopt a culture of security within the organization to combat. This requires clear, written policies covering how sensitive customer data should be handled and stored in order to combat growing fraud in the travel industry. These policies should be regularly communicated to all staff to ensure consistency in practice.
Implement Risk Management Services
Implementing risk management services should be a top priority. This involves constantly monitoring transactions to detect abnormal patterns, outliers, or potential threats, and taking immediate action when necessary. Advanced artificial intelligence (AI) and machine learning (ML) technologies can greatly assist in this process, offering real-time solutions for detecting and mitigating fraud.
Invest in Advanced Security Technologies
Adopting multi-factor or biometric authentication is another security-enhancing measure to combat identity theft and account takeover. Companies are advised to use secure online payment gateways that comply with the Payment Card Industry Data Security Standard (PCI DSS). These systems encrypt and secure cardholder data, diminishing the potential for theft or misuse.
Businesses must also proactively safeguard against chargebacks to address prevalent fraud in the travel industry. Tools such as secure payment gateways, delivery confirmation, and clear communication on terms and conditions can aid in reducing chargebacks.
The widespread of fake websites and platform cloning can be addressed by regularly monitoring the digital landscape for counterfeit versions of your company's online presence. Automated services can help detect these rogue operations, allowing firms to take legal action and alert customers promptly.
Communicate and Educate
Regular travel fraud prevention training for staff is another essential measure. Your personnel is the most potent line of defense against fraud. Educated staff can identify potential threats and understand the protocols to take when they suspect travel fraud.
Continuous customer education also serves as an effective protective shield. Informing them about common types of fraud and how they can protect themselves—such as not sharing personal information over the phone or clicking on suspicious links—significantly reduces their likelihood of becoming victims.
Recognized by the Everest Group as the World’s Fastest Business Process (Outsourcing) Service Provider and as a Major Contender in Financial Crime and Compliance (FCC) Operations – Services PEAK Matrix® Assessment in 2022, TaskUs is your trusted wingman to fight against travel fraud. TaskUs is at the forefront of the digital crime-fighting arena, and we can help you stay protected against fraudulent chargebacks and payments.
Combining human-led, AI-backed travel and hospitality solutions, we monitor platform activity for signs of fraud and respond to user-reported complaints, escalating high-priority matters for immediate review. Our highly skilled fraud investigators identify systemic threats and quickly manage cases to maintain tolerance limits. We also deploy workflows, automation, and case management tools to quickly process chargebacks and disputes, validate transactions, and challenge when warranted.