Travel fraud is on the rise, and it's quickly becoming everybody's problem.

The rise of online travel has created a wealth of convenience and opportunity for users, who can now access last minute and discount fares to a degree unheard of even 20 years ago. However, says the digital security firm Sift Science, this has also created a broad platform for thieves and con artists.

Travelers, hosts and even huge companies are vulnerable. Thieves steal, on average, between $283 and $588 per fraudulent transaction. In total, fraud costs billions of dollars per year. Airlines alone lose from $2.4 billion to $4.8 billion to credit card fraud annually, and it happens at virtually every point in the industry. For many travelers, it can represent a very real problem.

What is travel fraud?

"There is no one face to fraud," said Kevin Lee, whose title is officially Trust and Safety Architect with Sift Science. "The sophistication and wide vectors of attack make fraud a complicated problem. Fraud can occur across numerous points of the user journey, from the point of login to purchase and post-purchase activities."  

"And the travel industry is an easy target for fraudsters because bookings are intangible, don't need to be picked up like a physical item, and perishable -- happen quick so companies are racing the clock to detect and block a bad purchase."

For researchers and industry, "fraud" defines any purchase made under false pretenses. The trouble is that in travel there are many points of contact where this can go wrong. Thieves can often book travel using stolen credit cards or financial information, effectively stealing a high-value airline ticket or hotel room in the process. For hotels especially, same-day bookings are up to 4.3 times more likely to be fraudulent because the short time frame makes it far harder for the hotel or authorities to detect anything wrong. By the time a consumer has noticed the charge on his or her credit card statement, the criminal is often long gone.

Others will attempt to buy high-value travel bookings with stolen financial information and then return them hoping for a cash refund. This is more difficult in the United States, where most airlines will refund back to the purchasing instrument, but in many countries it can mean the equivalent of hundreds of dollars in loss per ticket.

For consumers, it can also mean selling illegitimate tickets.

"Fraudsters pose as travel agencies to scam travelers," Lee said.

"People who use stolen payment information are able to acquire tickets and then use them for themselves or re-sell them to unsuspecting, innocent buyers. Fraudsters have been known to create discounted ticket sites offering steep discounts to travelers. Then, when the innocent consumer thinks they have purchased a ticket on the site, they actually end up acquiring a ticket that has been purchased fraudulently."

Travelers need to be acutely aware of this scam. Today fraudulent websites with real, working payment systems are all too easy to build. If the e-ticket doesn't have a confirmation number that the airline can independently confirm, there's a high chance of a third-party scam. For victims, the impact can be twofold. Not only do they face the potential financial loss, but entire vacations can go up in smoke as travelers stand at the airport holding a handful of worthless tickets.

It's Changing the Industry

Travel fraud doesn't just cost travelers and hotels money. It's changing how the industry does business.

According to industry reports, some airlines now reject as many as 8% to 25% of legitimate orders online out of fears of fraudulent activity. This means real people will discover that their plans didn't go through, creating enormous turmoil for last-minute travelers. The industry has also begun building in manual processes at every level, checking through bookings for indicia of fraud and theft.

This adds to the cost that legitimate consumers pay. It also limits the industry's ability to roll out online and mobile products. With more and more travelers making their plans through mobile devices, hotels, airlines and other industry members are looking for ways to roll out a more seamless experience.

"For travel businesses to stay competitive, they have to expand their product offerings [and] sell in more regions and to a broader audience, and therefore increase their exposure to fraud," said Lee. "Many companies… [are] unable to grow in the way they need. This limits the options available to travelers, creates significant burdens on customers, and in many cases, makes it impossible for consumers to get last-minute accommodations when traveling to particular regions."

Yet the easier it is for a consumer to book their trip, the easier it is for a criminal to scam the system. That means that every new product and every new point of convenience has to take that into account. If the company can't secure its product, they can't release it. Ultimately, it will be the traveler who loses out.

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