A new report released this week by Riskified (NYSE: RSKD), a leader in ecommerce fraud and risk intelligence, shows that the Australian travel sector is suffering from alarming fraud challenges, with certain travel routes seen as ‘high risk’.
Based on Australia’s top 10 destinations by volume, flights departing from Australia to Indonesia are 2.5x more likely than the average to be fraudulent tickets or linked to fraud in some way. The second most likely travel route to be fraudulent flight tickets or linked to fraud in some way is Australia to the United States with 2x the average, and the third is Australia to the United Arab Emirates with 15% above average. (See Graph One below.) Year on year, flight purchases were at a 14% higher risk of fraud from mid-2023 to mid-2024, compared to the same period between mid-2022 and mid-2023.
“Travel fraud is not well known outside the travel industry, and both the travel providers and Australian travellers are affected,” said Nicholas Kirtley, ANZ Country Manager at Riskified. “Fraud in the travel sector covers many variations including using stolen credit card details to buy tickets and then reselling those tickets to unsuspecting travellers by attracting people with ‘too-good-to-be-true’ prices, in places such online forums or on the dark web.
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“Sometimes it’s a ‘buy for order’ arrangement using stolen credit cards. This causes all sorts of problems for the traveller when they arrive at the airport to travel on stolen tickets. In addition, often their credit card details are then also stolen when they pay for the stolen flight ticket they purchased.”
“Compared to fraud in other sectors, where red flags are raised by financial institutions during online purchases, often in the travel sector a credit card location and a computer IP location not matching is not seen as a problem, as the travel industry is inherently global with people moving locations,” added Nicholas. “This makes differentiating between a fraudster and a safe consumer more challenging for travel providers, and this creates an opportunity for criminals.”
International fraud gangs
Much of the fraud committed in the travel sector is by organised gangs from countries such as Indonesia, China and Russia, but also increasingly from Europe. “The activity is very sophisticated and organised. This isn’t lone fraudsters targeting Aussie travellers and travel providers, this is organised gangs, often from the countries that Aussie fly to the most, such as Indonesia,” Nicholas added.
Travel – the highest risk category in global e-commerce
Riskified’s report also highlighted that when comparing the fraud risk of all online purchases globally, ‘flights and hotels’ exhibit a substantially higher risk profile than traditional physical goods when bought online. (See Graph Two below). “Many believe that ecommerce fraud is all about clothing and electrical items, but this is not the case,” said Nicholas. “Travel fraud is a growing problem that requires an evolving solution.”
A further area of fraud in the travel sector is in the ‘airline reward points’ space where fraudsters see them as especially valuable. During ‘Account Takeovers’ (ATO) fraudsters gain access to a user’s frequent flyer account. Once inside, they transfer points to other accounts, or redeem them for flights, upgrades, gift cards, or sell them on the black market.
Classic fraud also occurs in the airline rewards points space when fraudsters send fake emails or set up websites mimicking airlines, tricking users into sharing their login credentials. Some fraudsters manipulate the system by creating fake flights, non-existent hotel stays, or phantom purchases, that trigger the accumulation of loyalty points without any real transaction. Also, fraudsters may use compromised accounts to redeem points for flights, hotel stays, or other rewards, often reselling these rewards for a profit.
“We have found that scammers collaborate on the dark web about how to transfer travel loyalty points from one stolen personal account to another, to then purchase tickets at a lower rate or sell the points for cash,” Nicholas added.
“The underground gift card market is also thriving, as this method of payment provides anonymity to wrongdoers. Scammers also sell their services to commit fraud on behalf of others highlighting their approach is getting more sophisticated and professional.”
