Online Fraud in the Travel Industry and Means of Its Prevention

As technology advances, so do the methods of digital fraud in travel.

 

Without robust prevention strategies, businesses risk severe billions of dollars yearly in direct losses, higher operating expenses, reputational damage, and legal ramifications.

 

Good news! 

 

Travel companies can now access advanced travel fraud prevention tools without compromising the customer experience. And guess what? The Onix team is here to lend a hand with implementing travel fraud detection solutions.

 

As a travel software development company, we know the ins and outs of building travel solutions, including the complexities of travel fraud detection and effective means of prevention. 

 

In this article, our tech experts:

 

• examine some of the most common online travel industry threats
• share practical tips and effective strategies for preventing travel fraud
• show how Onix successfully implemented fraud prevention measures on an Airbnb-like project.

 

Keep reading to learn how to combat online fraud effectively in the tourism industry, safeguard your operations, and foster customer trust.

The Onix team provided a fraud detection solution for a travel booking platform

Most Common Types of Online Travel Fraud

Understanding the various types of fraud in the travel industry is crucial for businesses to protect themselves against financial loss and reputational damage. 

 

In this section, we delve into the most common types of online travel fraud, providing detailed information on each.

 

Fake booking scams 

This is a type of online fraud where individuals or groups create deceptive listings for accommodations, flights, or other travel services to defraud unsuspecting consumers.

 

These scams typically involve the creation of false advertisements or listings on online platforms such as vacation rental websites, hotel booking platforms, or classified advertisement sites.

 

Below, our experts provide a detailed description of how fake booking scams typically work.

 

1. Creation of fake listings

Fraudsters create fake listings for accommodations, flights, or other travel services using fictitious details or copying information from legitimate listings. These fake listings often feature attractive photos, detailed descriptions, and enticing offers to lure in potential victims.

 

2. Deceptive advertising

Fraudsters may use tactics to promote fake listings, such as posting them on popular travel websites, social media platforms, or classified advertisement sites.

 

3. Attractive offers and discounts

Fake booking scams often promise attractive offers, discounts, or special deals to entice travelers into making a reservation.

 

These offers may include significantly discounted prices, free upgrades, or exclusive perks to make the fake listings appear more appealing.

 

4. Phony booking process

When a traveler shows interest in a fake listing and attempts to book the accommodation or service, they are directed to a fraudulent booking process.

 

This process may involve filling out personal and financial information on a fake website or communicating with the fraudster via email or messaging apps.

 

5. Payment request

After the traveler provides their payment information, the fraudster requests payment for the booking. Payment methods may include credit cards, bank transfers, or online payment platforms.

 

6. No confirmation or service provided

The fraudster typically disappears once the payment is made, and the victim receives no confirmation of their booking.

 

In some cases, victims may receive fake booking confirmations or documents, but when they arrive at the destination, they discover that the accommodation or service does not exist.

 

7. Loss of money and personal information

Victims of fake booking scams not only lose their money but may also have their personal and financial information compromised. Fraudsters may use stolen information for identity theft, credit card fraud, or other criminal activities.

 

 

Phishing attacks

Phishing attacks in online travel refer to malicious attempts by cybercriminals to deceive travelers into providing sensitive information, such as login credentials, personal details, or financial data, through fake communication channels that mimic legitimate travel-related entities.

 

These attacks exploit trust in well-known travel brands or services to trick users into divulging confidential information. 

 

Here's a detailed overview of how phishing attacks in online travel typically occur:

 

1. Deceptive emails, messages, or websites

Phishing attacks often begin with the cybercriminal sending out deceptive messages that appear to be from reputable travel companies, airlines, hotels, or booking platforms.

 

The messages may contain urgent requests, enticing offers, or alarming notices designed to prompt immediate action from the recipient.

 

2. Spoofing of legitimate brands

Cybercriminals mimic legitimate travel brands and replicate their logos, email templates, and website designs, making it difficult for users to distinguish between genuine and fraudulent communications.

 

3. False promises and offers

Phishing messages often contain false promises of exclusive travel deals, discounts, or rewards to lure recipients into clicking on malicious links or downloading harmful attachments.

 

4. Fake booking confirmations or alerts

Cybercriminals may send unsuspecting travelers fake booking confirmations, flight itineraries, or reservation alerts. These messages typically contain links or attachments that, when clicked or downloaded, lead to phishing websites or malware-infected files.

 

5. Phishing websites and forms

These fake websites prompt users to enter their login credentials, personal information, or financial details, which are then captured by the cybercriminals.

 

6. Data theft and identity fraud

Once users provide their sensitive information, cybercriminals harvest it for malicious purposes. Stolen data may be used for identity theft, credit card fraud, unauthorized purchases, or sold on the dark web to other cybercriminals.

 

Learn more: How to Develop a Website Like Airbnb? [Complete Guide]

 

Payment fraud

Online purchase frauds involve the unauthorized use of payment information, such as credit card numbers or bank account details, to make fraudulent transactions related to booking flights, accommodations, car rentals, or other travel services.

 

Here's a detailed overview of payment fraud in online travel:

 

• Credit card fraud

It happens when cybercriminals use stolen or fake credit card information to make unauthorized bookings for travel services. They obtain these details through data breaches, phishing scams, or purchasing them on the dark web.

 

Fraudsters book flights, hotels, rental cars, or vacation packages online with the stolen information, often using fake identities or stolen personal data.

 

The International Air Transport Association estimates airlines lose over $1 billion annually to credit card fraud.

 

However, this amount only partially captures the overall cost. For every dollar lost to fraud, merchants face an additional $3.75 in losses from chargeback fees, wasted overhead, unnecessary administrative expenses, and unpaid bookings.

 

• Unauthorized ticketing attacks

This type of fraud encompasses the creation and sale of fake tickets, distribution of invalid tickets obtained through unauthorized means, unauthorized resale of legitimate tickets, and phishing scams.

 

Victims of unauthorized ticketing fraud may experience financial losses and disruptions to their travel plans, such as being denied boarding or entering accommodations booked with fraudulent tickets. 

 

For example, fraud detectors at ARC had found around 80 instances of unauthorized ticketing, totaling about $1.2 million. According to Doug Nass, ARC's manager of fraud investigations, successful unauthorized ticketing attacks typically involve issuing 5 to 10 tickets per attack, utilizing the Global Distribution System credentials of unsuspecting travel advisor victims.

 

Each ticket carries an average value ranging between $800 and $1,200. Small and midsize travel agencies, along with large ticket consolidators, are the most common targets of such attacks.

 

• Account takeover fraud

This fraud happens when fraudsters gain unauthorized access to a traveler's online booking account through phishing, brute force attacks, or purchasing stolen login details. Once inside, they can make unauthorized bookings, modify reservations, or use loyalty points or travel credits without permission.

 

• Identity theft

This is the unauthorized use of personal information like name, address, and Social Security number for fraudulent activities.

 

Fraudsters obtain this data through data breaches, phishing, or social engineering. In online travel, they use stolen identities to create fake accounts, book trips fraudulently, or evade security measures for payment fraud.

 

• Chargeback fraud

It happens when a traveler disputes a legitimate transaction, claiming it was unauthorized or unsatisfactory. Fraudsters exploit this by making a booking, using the services, and then disputing the charge to get a refund while keeping the benefits. This causes financial losses for travel companies due to refunds and chargeback fees.

 

Account takeover (ATO) 

This type of cyberattack is where fraudsters gain unauthorized access to a traveler's account on a travel website or booking platform. Once they successfully take over the account, they can exploit it for various fraudulent activities.

 

Here's a detailed description of how ATO typically happens in online travel:

 

• Phishing attacks

Fraudsters send fake emails or messages posing as legitimate travel companies or booking sites. These messages include links to phony login pages resembling the real site, tricking users into giving away their login details. Unsuspecting travelers then unknowingly provide their usernames and passwords, giving fraudsters access to their accounts.

 

• Brute force attacks

Fraudsters conduct ATO through brute force attacks, using automated software to try various username and password combinations until they succeed. They target weak or easily guessed passwords and accounts lacking security features like lockout after multiple failed login attempts.

 

• Credential stuffing

In credential stuffing attacks, fraudsters reuse stolen login credentials from data breaches on multiple websites, including travel booking platforms. Because people often reuse passwords across accounts, fraudsters can gain access to travelers' accounts.

 

• Compromised devices or networks

Malware or keyloggers installed on a device can capture login credentials, while hackers can intercept data transmitted over unsecured networks.

 

• Account data breaches

Sometimes, ATOs happen due to large-scale data breaches affecting travel companies or booking platforms. If travelers' login credentials are exposed to such breaches, fraudsters can use them to gain unauthorized access to accounts.

 

Loyalty program fraud

This travel fraud refers to deceptive activities that exploit weaknesses in loyalty programs offered by airlines, hotels, car rental companies, and other travel service providers. These frauds target the rewards, points, discounts, and perks offered through loyalty programs.

 

Here's a detailed description of how loyalty program fraud occurs:

 

Point theft

Fraudsters steal points or miles from travelers' loyalty program accounts by accessing them illegitimately. They transfer points to their own accounts or redeem them for travel rewards, essentially stealing the rewards that belong to the account holder.

 

Points laundering

Points laundering involves transferring stolen rewards between real and fake accounts to hide fraudulent activity. Fraudsters use stolen rewards to book travel or exchange them for cash or goods.

 

Promotion abuse

Fraudsters exploit promotions or bonus point offers within loyalty programs to accrue points through deceptive methods. This could involve creating multiple accounts to take advantage of sign-up bonuses or engaging in "manufactured spending" to earn points without genuine spending.

 

Below you can delve into these eye-opening numbers that reveal the extent of damage travel fraud can do to your business's bottom line.

 

How to Prevent Online Fraud in Travel: Onix's Best Practices

From fake bookings to identity theft, travel businesses face numerous challenges in maintaining the integrity of their operations. However, with the right tools and techniques, businesses can prevent fraud and protect their reputation and revenue streams.

 

At Onix, we take travel data protection seriously, implementing industry-leading security measures and ensuring that the software we build adheres to relevant regulations.

 

 

Below, our experts share some of the most effective online travel fraud detection best practices that can help safeguard your business against fraudulent activities.

 

Implement strong authentication measures

By implementing strong authentication measures, travel businesses can significantly enhance security, reduce the risk of fraud, and protect sensitive information and assets from unauthorized access.

 

Below, our experts provide some tips on how to do it.

 

Two-factor authentication (2FA):

 

• Enable 2FA for all user accounts, including customer and employee accounts accessing sensitive information.
• Require users to provide two verification forms, such as a password and a one-time code sent to their mobile device or email, before granting access.

 

Biometric authentication:

 

• Utilize biometric authentication methods such as fingerprint or facial recognition for an additional layer of security.
• Integrate biometric authentication into mobile apps or online platforms for user login and transaction authorization.

 

Multi-step verification:

 

• Implement multi-step verification processes that involve multiple authentication factors, such as passwords, security questions, and biometric verification.
• Customize the verification process based on the sensitivity of the information being accessed or the value of the transaction.

 

Tokenization:

 

• Implement tokenization to secure sensitive data such as payment card information.
• Replace actual card numbers with randomly generated tokens that are meaningless to attackers if intercepted.

 

Secure access controls:

 

• Restrict access to sensitive systems, databases, and networks based on user roles and permissions.
• Implement role-based access controls (RBAC) to ensure users only have access to the information and resources necessary for their job functions.

 

Ensure securing payment gateways

 

"Embracing the right payment gateway is akin to crafting a smooth journey for both travelers and businesses. At Onix, we believe in empowering travel businesses with seamless, secure, and innovative solutions.

 

By integrating cutting-edge payment gateways, we enable businesses to focus on what truly matters – delivering exceptional travel experiences while we handle the complexities behind the scenes."

- Denis Sheremetov, CTO at Onix

 

Our specialists recommend integrating secure payment gateways with advanced encryption protocols to protect sensitive customer data during online transactions.

 

Choose reputable payment processors:

 

• Partner with established, reputable payment processors and gateway providers that comply with industry standards and regulations.
• Verify that the payment processor offers advanced security features such as encryption, tokenization, and fraud detection.

 

For example, for TravelBid.com, Onix’s experts integrated Stripe and PayPal.

 

For Misterb&b, an online rental marketplace known as the ‘gay Airbnb’, we integrated Stripe, Paypal, Payoneer, and Adyen payment systems to support transactions between 300,000+ hosts and millions of travelers across 200 countries.

 

Implement SSL (Secure Sockets Layer) encryption:

 

• Secure your website and payment pages with SSL encryption to protect customer payment information during transmission.
• Use HTTPS protocols for all payment transactions to ensure data integrity and confidentiality.

 

Payment card industry data security standard (PCI DSS) compliance:

 

• Ensure that your payment gateway and processing systems comply with the PCI DSS.
• Implement security measures such as firewalls, access controls, and regular security audits to protect cardholder data.

 

Tokenization:

 

• Implement tokenization to replace sensitive payment card data with randomly generated tokens.
• Tokens are meaningless to attackers if intercepted, reducing the risk of data breaches and unauthorized access to cardholder information.

 

Address verification system (AVS):

 

• Enable AVS checks to verify that the billing address provided by the customer matches the address on file with the card issuer.
• AVS helps detect fraudulent transactions by flagging discrepancies between the billing address and cardholder information.

 

Card verification value (CVV) or card verification code (CVC)  verification:

 

• Require customers to provide the CVV or CVC printed on their payment cards during checkout.
• CVV/CVC verification adds an extra layer of security by verifying that the customer possesses the physical card during the transaction.

 

 

Provide anti-account takeover (ATO) mechanisms

Anti-ATO mechanisms allow travel businesses to safeguard customer accounts, prevent unauthorized access, and maintain trust and confidence in their online platforms and services.

 

Here are some tips from our expert to implement anti-ATO mechanisms effectively:

 

IP address monitoring:

 

• Monitor the IP addresses used for account login attempts and transactions to detect suspicious activity.
• Flag login attempts from unrecognized or unusual IP addresses for further verification or block them outright if deemed high-risk.

 

Account lockout policies:

 

• Implement account lockout policies that temporarily suspend or restrict access to accounts after a certain number of failed login attempts.
• Set thresholds for failed login attempts and enforce lockouts to prevent brute-force attacks and unauthorized account access.

 

Email and SMS alerts:

 

• Enable email or SMS alerts to notify customers of any changes or suspicious activity detected in their accounts, such as login attempts from new devices or password changes.
• Prompt customers to take immediate action if they suspect unauthorized access to their accounts, such as resetting their passwords or contacting customer support.

 

3-D Secure:

 

• 3-D Secure works as an online PIN code. At checkout, it directs users to a separate page to enter a unique code. This adds insignificant friction for legitimate customers but places a barrier in front of swindlers.

 

Integrate know your customer (KYC) verification

Using KYC verification effectively, travel businesses can verify the identity of customers, mitigate the risk of fraud and financial crime, and ensure compliance with regulatory requirements.

 

It's essential to balance robust KYC procedures and a seamless customer experience to foster customer trust and confidence while safeguarding against fraudulent activity.

 

Here's how to do it effectively:

 

Collect customer information:

 

• Gather relevant customer information during the registration or booking process, including full name, address, contact details, date of birth, and government-issued identification documents.
• Ensure that customers provide accurate and verifiable information to establish their identity.

 

Verify identity documents:

 

• Require customers to upload scanned copies or photos of government-issued identification documents, such as passports or driver's licenses.
• Use identity verification solutions to authenticate the validity of documents and verify that they match the information provided by the customer.

 

Perform document verification:

 

• Utilize document verification tools or services to verify the authenticity of identification documents provided by customers.
• Check for security features, such as watermarks, holograms, and microprinting, to ensure that documents are genuine.

 

Perform watchlist screening:

 

• Screen customer information against watchlists, sanctions lists, and databases of known fraudsters, terrorists, or politically exposed persons (PEPs).
• Flag any matches or hits for further review and investigation to ensure compliance with regulatory requirements and mitigate risk.

 

Implement risk-based KYC procedures:

 

• Tailor KYC procedures based on the risk profile of customers and transactions.
• Apply enhanced due diligence measures for high-risk customers, such as those making large transactions or exhibiting suspicious behavior.

 

Implement behavioral analysis

The Onix team utilizes behavioral analysis techniques to assess user behavior and detect anomalies indicative of fraudulent activities.

 

Here are some practical tips on how to implement this best practice effectively:

 

Collect comprehensive user data:

 

• Gather comprehensive data on user behavior across various touchpoints, including website interactions, transaction history, login activities, and navigation patterns.
• Utilize data analytics tools to collect and aggregate user data from multiple sources.

 

Define normal behavior baselines:

 

• Establish baseline profiles of normal user behavior for different user segments, considering factors such as time of day, device type, geographical location, transaction history, and typical spending patterns.
• Use statistical methods and machine learning algorithms to analyze historical data and identify typical behavior patterns.

 

Learn more: Fraud Detection Using Machine Learning: A Comprehensive Overview

 

Identify anomalies and red flags:

 

• Continuously monitor user behavior in real-time to detect deviations from established baseline profiles.
• Look for anomalies such as unusual login times or locations, atypical transaction amounts or frequencies, sudden changes in spending behavior, or patterns inconsistent with past behavior.

 

Utilize advanced analytics techniques:

 

• Employ advanced analytics techniques such as machine learning, artificial intelligence, and predictive modeling to identify subtle patterns and trends indicative of fraudulent behavior.
• Train algorithms to recognize known fraud patterns and adapt dynamically to new emerging threats.

 

 

Implement risk scoring and thresholds:

 

• Assign risk scores to individual transactions or user interactions based on the severity and likelihood of fraudulent behavior.
• Set thresholds for risk scores to trigger alerts or additional authentication measures when suspicious activity is detected.

 

Data breach prevention methods

Data breach prevention methods in travel allow businesses to protect sensitive customer information and maintain trust and confidence in their services.

 

Here are the best practices from the Onix team to implement data breach prevention methods effectively:

 

Encrypt sensitive data:

 

• Encrypt sensitive customer information such as payment card data, personal identification details, and travel itineraries in transit and at rest.
• Utilize strong encryption algorithms and secure key management practices to protect data from unauthorized access.

 

Secure network infrastructure:

 

• Implement robust network security measures such as firewalls, intrusion detection systems (IDS), and network segmentation to protect against unauthorized access and data breaches.
• Regularly monitor network traffic for signs of suspicious activity and promptly investigate any anomalies.

 

Implement data loss prevention (DLP) solutions:

 

• Deploy DLP solutions to monitor and control the movement of sensitive data within the organization.
• Use DLP policies to prevent unauthorized access, transmission, or storage of sensitive information and enforce encryption and data masking where appropriate.

 

Incident response planning:

 

• Develop and maintain an incident response plan that outlines procedures for responding to data breaches and security incidents.
• Establish a dedicated incident response team and define roles and responsibilities for handling breaches, notifying affected parties, and coordinating with law enforcement and regulatory authorities.

 

Monitor dark web activity:

 

• Monitor the dark web and underground forums for mentions of your organization's data or credentials.
• Utilize threat intelligence tools and services to identify and mitigate potential threats from compromised credentials or data leaks.

 

Compliance with data protection regulations:

 

• Ensure compliance with data protection regulations such as the General Data Protection Regulation (GDPR), Payment Card Industry Data Security Standard (PCI DSS), and other relevant industry-specific regulations.
• Regularly review and update data protection policies and procedures to align with regulatory requirements and industry best practices.

 

Use effective fraud detection tools

By leveraging online fraud prevention tools for travel, businesses can enhance their fraud prevention efforts, protect their assets and customers, and maintain trust and credibility in the marketplace.

 

Choosing tools that align with your business needs and integrating them seamlessly into your fraud prevention strategy for optimal effectiveness is essential.

 

Read also: The Tech Advantage: Trends Reshaping Hospitality and Guest Engagement

 

Here are some of the most effective fraud detection tools you can use:

 

• Machine learning-based fraud detection systems

These systems use machine learning algorithms to analyze large volumes of data and identify patterns indicative of fraudulent behavior. They can adapt and evolve to detect emerging fraud trends.

• Rule-based fraud detection systems

Rule-based systems allow businesses to define specific rules and thresholds for identifying potentially fraudulent transactions based on predefined criteria. These rules can include transaction amount, frequency, location, and user behavior.

 

• Identity verification solutions

Identity verification tools help businesses authenticate users and prevent account takeover fraud. These tools verify customer identity using document verification, biometric authentication, and knowledge-based authentication.

 

• Device fingerprinting technologies

Device fingerprinting technologies analyze and track device attributes such as IP address, browser type, operating system, and device ID to identify and track devices used for fraudulent transactions.

 

 

Onix’s Experience With Fraud Prevention in Travel

Onix successfully implemented online fraud detection and prevention measures in a travel booking website designed explicitly for renting LGBTQ-friendly accommodations, MisterB&B.

Travel booking platform fraud devection & prevention solution - built by the Onix team

 

Among the solutions implemented by Onix devs to support product functionalities and effectively combat online travel fraud, safeguard its operations, and foster trust among their customers, we can mention:

 

• integration with reliable property listing aggregators and providers like Booking.com, Rentals United, Guesty, Ospita from Koedia, and BookingSync

 

• integrations with Stripe, MANGOPAY, Adyen, PayPal, Tipalti, and Payoneer, allowing users to accept payments and securely send payouts online

 

• revamped integrations with existing property management platforms and other systems to utilize the new API, ensuring improved security, fewer vulnerabilities, enhanced documentation, and tailored features to meet specific requirements.

 

• implemented real-time monitoring capabilities within the fraud detection system to detect suspicious activities during the booking process.

 

• integrated the fraud detection system into the client's existing booking workflow and backend systems. We ensured that the fraud detection processes operated seamlessly in the background without impacting the user experience or causing delays in booking transactions.

 

Through close collaboration, the Onix team helped our client build a fraud detection system that enhanced the security of their travel booking website, protected against fraudulent activities, and preserved trust and confidence among their customers.

 

Summing Up

As online fraudsters are shifting their efforts earlier in the customer journey, travel businesses need to respond by implementing a continuous fraud prevention approach that automatically assesses events and provides protection throughout the entire customer journey.

 

Given the complexity of the task, relying on professional experts is essential.

 

The Onix team can help you navigate the complexities of travel fraud prevention effectively and ensure a secure environment for your business.

 

Don't miss out on the future of security! Contact us, and our experts will help safeguard your business and customer trust.

 

 

FAQ

 

What are the most common types of airline fraud?

The most common types of airline fraud include:

 

• ticket fraud, where stolen credit card information or fake payment methods are used to purchase tickets;
• loyalty program fraud, involving the illegitimate earning and redemption of rewards;
• chargeback fraud, where customers dispute legitimate transactions resulting in chargebacks for the airline;
• account takeover, where fraudsters gain unauthorized access to customer accounts;
• and ticket reselling, where tickets purchased with stolen credentials are resold at inflated prices.

 

What tools are available to prevent fraud in the tourism industry?

Various tools are available to prevent fraud in the tourism industry, including fraud detection software, secure payment gateways with encryption protocols, identity verification solutions utilizing biometric authentication, behavioral analysis systems to detect anomalies, two-factor authentication for added security, secure booking platforms with SSL encryption, and fraud monitoring and reporting systems.

 

These tools help businesses mitigate the risk of fraud and protect their financial interests and customer data.

 

What can be done about fraud in the travel and hospitality industry?

Businesses can implement a combination of preventive measures and best practices to address fraud in the travel and hospitality industry. This includes:

 

• utilizing advanced fraud detection software to analyze transaction data in real-time
• integrating secure payment gateways with encryption protocols implementing identity verification solutions for customer authentication
• conducting regular audits and monitoring of transactions
• educating employees and customers about common fraud schemes
• fostering collaboration with industry partners and law enforcement agencies to effectively share information and combat fraud. 

 

How can Onix help prevent travel fraud?

We offer a range of advanced tools and expertise tailored to the specific needs of the travel industry. This includes:

 

• implementing fraud detection software with machine learning and AI algorithms to analyze transaction data and detect suspicious activities in real-time
• Integration of secure payment gateways with robust encryption protocols to protect sensitive customer data during online transactions
• providing identity verification solutions utilizing biometric authentication and behavioral analysis systems to detect anomalies and prevent fraud.

 

With our experience and industry knowledge, we can tailor comprehensive fraud prevention strategies to help businesses in the travel sector mitigate risks and safeguard their operations.