Travel companies are being highly targeted by fraud, with the total impact of fraud currently costing travel intermediaries nearly US$21B, according to a new global study commissioned exclusively by eNett International, the leading provider of dedicated B2B travel payment solutions. The research predicts this could increase 20% to exceed US$25B by 2020.
Carried out by global payments focused consultancy, Edgar, Dunn & Company, on behalf of eNett, the total cost of fraud includes direct losses (US$6B), as well as indirect costs (US$15B) such as higher operating expenses and reputational damage. Driven by a rise in the volume of travel, and a shift by consumers towards online bookings, it is expected to exceed US$25B by 2020. Online Travel Agents are expected to be worst hit, with an expected loss of nearly US$11B globally.
eNett Managing Director and CEO, Anthony Hynes, said, “Our vision is to work with the industry and our customers to take the cost and complexity out of travel payments. So, in late 2017, we engaged Edgar, Dunn & Company to investigate fraud in travel payments – a hot topic in the industry.
“High value transactions, rapid consumption, online booking habits and the sheer number of suppliers across the globe means travel intermediaries are especially vulnerable to fraud. With industry margins already under immense pressure, it has never been more important for companies to understand where fraud occurs, and how to reduce its incidence and impact. The good news is payment solutions have also evolved to minimise the cost and reduce the risk of fraud significantly.”
Fraud in the travel value chain
A global survey of travel intermediaries, carried out as part of the study, found that fraud is a concern for nearly two thirds (60%) of companies when making payments to suppliers.
Key findings include:
- The three most common types of fraud cited in relation to making payments to suppliers are stolen payment method details, cyber breach of online booking platform and stolen security credentials;
- 29% of respondents identified foreign credit cards as the highest fraud risk when receiving payments;
- 35% identified receiving payments online as the channel with the highest risk;
- Indirect costs of fraud are approximately 2.5x the value of direct losses.
Hynes added: “Wherever money changes hands, fraudsters may take aim, but there are things travel companies can do to avoid falling victim. This starts with some quick wins, such as using payment methods that provide specific controls and opportunities for recovery. A more coordinated effort, including knowing your supplier and carrying out a comprehensive analysis of fraud patterns, will then help to effectively tackle fraud across the organisation.”
Martin Koderisch, head of payment fraud at consulting firm Edgar, Dunn & Company said, “It was a pleasure to partner with eNett to complete this robust study and uncover such compelling insights that will no doubt benefit travel companies around the globe”.
To help travel companies better control fraud and lower the potential impact on profits, eNett has identified 12 best practice tips based on the quantitative research data and expert interviews. To download the report, visit www.enett.com/insights.