Online fraud is a major issue for airlines. Almost all airlines now conduct most of their business over the internet or via mobile. By its nature it’s often cross-border business, which makes airlines an obvious target for criminals.
It’s also perceived as high-value, with great rewards available if the fraud is successful. And while passwords and two-factor authentication mechanisms do provide an extra layer of security, they don’t provide immunity to exploitation by sophisticated cybercriminals.
Fraudsters frequently try to exploit loopholes in existing systems – for example by capitalizing on the process of refunding money via loyalty accounts for canceled flights. We’re also seeing an alarmingly high – and rapidly growing – number of fraudulent websites masquerading as legitimate airline platforms. These seek to dupe unsuspecting customers into buying tickets that don’t exist, parting with sensitive financial information that can be exploited later, or having their identity stolen.
Airlines are also increasingly exposed to hacked loyalty accounts which are then used to purchase points or miles with fraudulent or stolen credit cards. Airlines are also vulnerable to fraud inflight, when passengers know there is no credit card verification possible, and baggage fraud, where passengers claim for damaged or lost bags when in fact there was nothing wrong – often using faked receipts to increase the claim.
This all causes airlines reputational damage – but it also has a huge financial implication.
Data is not yet available for the post-covid period, but a report commissioned by CyberSource before the pandemic estimated that online fraud was costing airlines 1.2% of annual revenue. This would have meant that fraud totaled over US$ 10 billion in 2018, based on GlobalData’s estimate of total airline revenues of US$ 835 billion that year.
The figures are truly dramatic – especially when you take into account the airlines’ already very thin margins. IATA has predicted that airline industry net profits will reach US$ 25.7 billion in 2024, giving a net profit margin of 2.7%. But taking that fraud figure of 1.2% into account, this means that airlines are losing a worrying 44% of their profits to fraudsters.
One of the reasons is that people who ‘buy’ air tickets fraudulently – inevitably – ‘spend’ much (much much) more on their tickets than ordinary, legitimate travelers.
So it’s normal that airlines are investing substantial resources in mitigating risks associated with identity verification, data security, and fraud prevention. Airlines now allocate significant budgets to safeguarding their operations and protecting passenger interests. From recruiting and training skilled personnel, to implementing cybersecurity measures and compliance protocols. And it should come as no surprise to discover that cybersecurity is now the number one investment priority for airlines – with 97% planning major programs in the next three years.
At SITA, we recognize the transformative potential of Digital Identity solutions, not only in the realm of biometrics but also in the domain of decentralized verifiable credentials. As a long-standing partner of the world’s airlines, we have developed a transformative digital travel credential (DTC) solution that will dramatically reduce opportunities for fraud. It promises to revolutionize the aviation landscape and usher in a new era of security, efficiency, and trust.
Tailored specifically for airlines, our DTC solution centers on the deployment of SITA’s verifiable credentials. These then serve as a cornerstone for streamlining operations, enhancing the passenger experience, and minimizing risks associated with identity management.
From a technical standpoint, our solution integrates SITA Digital Travel into your airline’s mobile applications, ushering in a new era of identity assurance. With the SITA Digital Travel Ecosystem, airlines can issue and verify travel documents securely and efficiently, without the need for cumbersome physical integration with third-party systems.
Decentralized identity solutions provide a robust mechanism for verifying authenticity, effectively eliminating the risk of fraud. By leveraging decentralized identity protocols, you can prevent criminals from forging travel documents or impersonating legitimate passengers.
SITA’s DTCs for Airlines builds on our successful implementation of a Digital Identity solution for travelers to Aruba, facilitating seamless journeys from the plane to the beach.
So why not benefit from a whole new level of certainty about who’s using your platform, who’s buying your tickets and who’s signed up to your loyalty program? And at the same time give your travelers the confidence they need?
This article was originally published by SITA.
