North Of The Border, Fraud Concerns With Travel Supply Chains

Payments fraud can happen just about anywhere, but there are some areas that get more scrutiny than others.

While all eyes may be on the United States for the transition to EMV and the specter of card-not-present fraud (CNP), there are other regions ripe for picking.

Consider the travel industry, and consider Canada. In an interview with PYMNTS, Anthony Hynes, chief executive officer at eNett, a travel payment firm, said that agencies have a number of concerns that run across the supply chain for travel agents and their partners.

Offering up an example of payments fraud specific to travel agents, Hynes said: “Travelers are more adventurous than ever, and agencies have managed more complex supplier relationships in destinations rife with criminal activity, such as fraud.”

“A key concern for Canadian agencies is supplier fraud; this is when the payment details at the supplier end of the transaction are compromised. For example, an employee at a hotel that has access to credit card details may use them for non-authorized transactions.”

Hynes noted that this particular slice of fraudulent activity represents a real threat, as “credit cards are the predominant means of booking accommodation and 90 percent of all hotel bookings made by Canadian agents are made by passing through the customer’s credit card.” And, of course, that means that fraud — while not hitting an agency directly — can have real impact on reputation (and, by extension, future business).

ENett itself, through a recently announced study, found that the continued and well-publicized move away from paper checks and toward electronic payments means that risk, in some forms, may actually increase. That runs contrary to the conventional wisdom that paper checks are a conduit for fraud. But, according to Hynes: “We don’t believe the findings in the research stunt the adoption of electronic payments. In fact, quite the opposite. The research highlights the concerns around fraud and the scale of the issue with respect to traditional payment methods.”

“Paper checks can be stolen, and signatures can be forged, and there is little recourse for the supplier if a check bounces. Physical cards are exposed to fraud because card details can be stolen and misused; if backed by a credit card scheme, agents or their customers can recover this but often not without some pain of proving misuse and replacing physical cards.”

That means, continued the executive, electronic payments — and virtual account numbers (VAN), such as those offered by his own firm — can be a strong defensive measure. In the case of a VAN, unique card numbers are generated against specific booking parameters, which means the card gets one use and only one use.

“Aside from the security benefits,” added Hynes, “electronic payment enables immediate payment, which provides the agent with access to dynamic and lower-rate fares; these are often not available if payment is by check.”

“Added to this is the need to be able to track and reconcile payments. It is estimated that manual payment and reconciliation costs the global travel industry $1.5 billion annually. Automated payments processing and reconciliation is only possible electronically.”

In reference to vulnerability of consumer data, Hynes explained the “pass-through method” of supplier payments, in which the agent does not act like the merchant but simply passes on customer credit card details to suppliers. And that opens up avenues to fraud, as the agents store credit card details, which need PCI compliance.

But, noted Hynes, if agents were to be able to act as suppliers, they’d be able to “bundle the supplier cost with their fees and mark up and charge the customer only once, thus providing a safer and higher value service. The agent would then pay the supplier with a more secure payment method, such as eNett VANs.” With that specific security in place, said Hynes, “we’ve seen phenomenal growth globally.”

Even as fraud may loom large for Canadian travel entities, said Hynes, eNett’s clients want to go to exotic, potentially risky locales. “But there’s also an opportunity for Canadian agents in all of this,” he said. “If they are able to confidently access a wider network of suppliers and hence offer more variety in terms of content, they are going to gain competitive advantage.”