Digital travel sales are expected to reach a staggering USD $817 billion by 2020. Driven by a desire for convenience, fast access to cheap deals and the confidence that comes with ATOL protection, people are more than happy to book a holiday on their laptop or their mobile.
This confidence in OTAs is good news for the travel sector, but while consumers can have confidence that their purchases are protected, can OTAs have the same confidence in all of their customers? The travel sector has unique risks that are not present in other ecommerce sectors ? how can they mitigate these risks?
The difference between the travel sector and ecommerce sectors is obvious when the average purchase is compared. The average online shopping basket at Amazon in 2016 was $86, while Sainsbury?s Bank produced research that claimed that the average holiday cost was around $500 per person, before spending money was taken into account. OTAs are dealing with much bigger purchases, meaning that a single fraudulent transaction is a much bigger deal. But that?s not where the differences end.
Ecommerce providers don?t charge the customer until an item is shipped, and place an authorisation hold until then. This means that the money cannot be received until the items are actually on the way to the customer, and that the online store carries the risk that the payment might be fraudulent until then. Luckily goods tend to be shipped quickly, so the risk is not carried for long.
For OTAs, it?s a different story. People can book holidays a year or even longer in advance, especially if it?s an expensive ?holiday of a lifetime?, and OTAs carry that risk until the day of travel. It?s a unique combination ? all companies that rely on Card Not Present transactions carry the risk of fraud but only OTAs have the combination of carrying such large transactions for a long time.
Carrying this risk is enough to cause real problems for a business that does not try to mitigate it. OTAs need to focus more on preventing fraud ? using advanced technology, but by also going back to basics. They need to make sure that their payment providers are using rules such as geolocation, behavioural algorithms, and extensive whitelists and blacklists to detect and eliminate fraud. But sometimes the best solutions are not the most advanced.
In order to check that the person making a big holiday purchase is who they say they are, the best option may be to simply contact the customer. Much is made of the consumer experience and ensuring it is as slick and frictionless as possible, but OTAs need to recognise that travel purchases are unlike other ecommerce payments. Consumers may be irritated by extra fraud checks for every piece of clothing, book or replacement cable they buy online, but are likely to appreciate time and care taken to make sure that a large and infrequent purchase like a holiday is not fraudulent. Sometimes friction in the payment process is actually welcome, and consumers will appreciate that care is being taken to make sure they are not being defrauded.
It?s food for thought as new regulation, PSD2, is due to be implemented soon. The regulation will require that any purchases over ?30 are protected by two-factor authentication. There will be exceptions, and many ecommerce providers will want to take advantage of these exceptions in order to provide a slick, frictionless payment service to their customer ? as they should. But OTAs, and their customers, may instead want to accept two-factor authentication, welcoming what may be seen as an irritant in other sectors.
