Wednesday, March 18, 2009

Airline Online Fraud

I had a presentation to a big local airline today. I tried to convince them to use our PayEasy online payment system for their online booking. To prepare for my presentation, I did some studies of the airline online booking industry and was surprised with some statistics.

According to data compiled for the Airline Online Fraud Survey between Dec. 1 and Jan. 16 in an online survey conducted by Mindwave Research in the U.S., and phone interviews by Vanson Bourne Ltd. in the U.K., the airline industry lost US$1.4 billion to online fraud. The study was based on responses from 99 airlines. Low-cost or budget airlines suffered the most with 1.6% of their online sales came from fraud. Business-oriented carriers had a lower 1.1% fraud rate due to higher screening.

While online booking is risky, its the way to go. According to the same study, as much as 33% of airline booking on the average are now done online. This was confirmed with my meeting with the e-commerce head of the local airline. In their case, as much as 40% of their business is already coming from online booking!

They said they tried some time ago to require the passenger to show the credit card used for booking upon check-in, but eventually relented because it was too much hassle. A lot of legitimate passengers apparently do not buy their own tickets with their own credit cards. There were several cases of foreigners buying tickets for their "girlfriends" to meet up some place. So obviously, asking these "girlfriends" to show the card used for purchase would be impossible.

I was hoping to integrate the payment system of this local airline to PayPal, of which PayEasy is a Channel Partner. But it seems that PayPal is also cautious of airlines and require that there be a corporate presence in Singapore (for Asia-based airlines). This is not necessarily a problem for our prospect since they do have a Singapore office. But the rates are still quite high as compared to what banks offer locally for credit card payments.

Here's a longer story regarding the survey:

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