3-D Secure 2014 benchmarking study for Airline & Travel industry

Airline & Travel industry 3-D Secure practices

The Airline & Travel industry relies on online channels to generate revenues. Compared to other industries, the average basket value is very high, making it an attractive target for fraudsters. It is therefore essential for merchants of this industry to choose the best use of all relevant fraud prevention solutions, including 3-D Secure authentication.

METHODOLOGY USED FOR THE BENCHMARKING STUDY

This 3-D Secure benchmarking for the Airline & Travel industry involved a review of 38,665 946 transactions made between January, the 1st of 2014 and November, the 15th of 2014. The transactions involved 4,601 webshops. 106 merchants have responded to the survey in order to better understand 3-D Secure adoption and practices according to country, merchant location and business type.

Survey respondents

Company annual revenue Industry Region

>1b$ 47

500m-1b$ 14

300m-500m$ 9

100m-300m$ 16

50m-100m$ 6

10m-50m$ 8

10m$ 6 Airline 75

Other travel industry companies 14

OTA* 17

Europe 42Middle East 14

North America 16South America 5

Asia 19Oceania 7

3-D Secure is a security protocol designed namely by Visa and Mastercard. As an additional security layer, it helps merchants to reduce fraud risk, yet adds an extra step in the payment purchase. The purpose is similar than PIN code or writing a signature for a transaction on a physical transaction. In practice, enrolled issuers implement an additional step of consumer authentication.

3-D Secure has been designed to allow merchants to:• Reduce their online fraud• Mitigate their risk (when liability shift applies)• Obtain reduced interchange fees

Issuers have implemented very heterogeneous authentication methods for 3-D Secure:

• Static password• Dynamic and unique password• Risk based authentication

• Card reader• Digipass entering a PIN code • ...

3-D Secure

JCBJ/Secure

The results show how much 3-D Secure policy impacts internal departments in a company. The way 3-D Secure is handled impacts the revenues of a company, the risk management and the fraud prevention.

Who decides about 3-D Secure policy in the company:

E-Commerce Payment Finance Fraud Others

36 %

14 %25 %

13 % 18 %

Rom

ania

Nethe

rland

s

United

Ara

b Em

irates

Saud

i Ara

bia

Egyp

t

Belgium

Unite

d Kin

gdom

Sing

apor

e

Fran

ce

Switz

erland

Spain

Ireland

Russ

ia

Chin

aIta

ly

Austra

lia

Germ

any

Austri

a

Portu

gal

Swed

en

Japa

n

Norway

Cana

daPe

ruCh

ile

Brazil

Argen

tina

Unite

d St

ates

Colom

bia

Mex

ico

3-D Secure adoption per card country:

Share of card transactions authenticated with 3-D Secure (Source: Sample of Ingenico 2014 transactions data in Airline & Travel industry 38m transactions).

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

America (North & South) & Oceania EuropeMiddle East & Arabic countries Asia

* Online travel agencies

IMPACT OF 3-D SECURE ON CHARGEBACKS

Decrease of chargeback rate when using 3-D Secure

Decrease of chargeback rate when using 3-D Secure - per industry

Decrease of chargeback rate when using 3-D Secure - per region

Airline

OTA*

Other travel industry companies

Decreased by 25% to 50%

I don’t know

Decreased between 10% and 25%

Decreased more than 50%

Decreased by less than 10%

Decreased by 25% to 50%

I don’t know

Decreased between 10% and 25%

Decreased more than 50%

Decreased by less than 10%

0-10%

10%

10-25%

8%

25-50%

8%

50%+

23%

I don’t know

51%

As the survey results point out, 3-D Secure shows a significant and positive impact on chargebacks and fraud decrease while also negatively impacting conversion and revenues. Online Airline & Travel webshops therefore implemented diverse 3-D Secure practices. See hereafter.

IMPACT OF 3-D SECURE ON DROP OFF

Drop off increase when using 3-D Secure

Drop off increase when using 3-D Secure - per industry

Other travel industry companies

Airline

Increased by 25% to 50%

I don’t know

Increased between 10% and 25%

Increased moret than 50%

Increased by less than 10%

28%

5%3%

41%

23%

0-10% 10-25% 25-50% 50%+ I don’t know

OTA*

Drop off increase when using 3-D Secure - per region

Increased by 25% to 50%

I don’t know

Increased between 10% and 25%

Increased moret than 50%

Increased by less than 10%

* Online travel agencies

Usages of 3-D Secure - per industry

All the time 31% Flexibly 53%Not at all 16%

All the time 31% Flexibly 53%Not at all 16%

Usages of 3-D Secure - per region

When do merchants use 3-D Secure in a flexible way?

54%Card country46%Fraud risk score

Itinerary 33%Others 25%Time of bookings 25%Issuing bank 25%Device type 21%Amount 21%IP country 21%Regulation 13%

Airline

OTA *

Other travel industry company

USAGES OF 3-D SECURE

All the time 31% Flexibly 53%Not at all 16%

* Online travel agencies

DISCOVER FLEX3DS

3-D Secure levels of adoption and drop off rates vary greatly across the world. It is important to take into account local online behaviour and to adopt a selective 3-D Secure approach when selling internationally. Increasingly, more online businesses are implementing such an approach.

With Flex3DS, Ingenico Payment Services offers merchants an easy-to-use and highly flexible tool that activates and deactivates 3-D Secure based on transaction context.

Merchants using Flex3DS can, in a few clicks, define the activation of 3-D Secure based on the risk associated with the transaction (via Ingenico Fraud Expert suite). The issuing country of the card used, the purchase amount, the channel, and other variables can be factored into the decision-making process.

When combined with the Flex3DS feature, Ingenico advanced fraud prevention solutions provide a complete set of sophisticated tools to help merchants find the best balance between fraud prevention and revenue optimization.

ABOUT INGENICO PAYMENT SERVICES

Ingenico Payment Services provides a comprehensive range of secure payment services to enable merchants to consolidate payment channels and optimize financial services. Supporting 150 international and local payment methods, we help merchants to manage, collect and secure payments and prevent fraud on digital transactions. Ingenico Payment Services is part of the Ingenico Group, the global leader in seamless payment.

ABOUT AIRLINES INFORMATION NETWORK

Airline Information is an established leader and innovator in commercial aviation conferences. Since 2005, Airline Information has hosted thousands of airline and travel professionals at the company’s groundbreaking conferences, forums, workshops and networking events. Airline Information is also home to the airline industry’s most forward-thinking research in loyalty and merchandising. Airline professionals, marketers, investment firms and industry suppliers turn to Ai for the latest trends, advisory and industry guidebooks.

3 TIPS FOR A FLEXIBLE 3-D SECURE APPROACH

Combined criteria based and risk score selective activation of 3-D SecureExample: - If risk is high and/or country is Netherlands • 3-D Secure

- If risk is low and/or country is USA • no 3-D Secure

Define how the 3-D Secure authentication result will influence the risk score Example: - If authentication is successful, reduce risk score and override blocking rules

Propose guaranteed payment method as fall back to risky & non 3-D Secure authenticated ordersExample: - If authentication isn’t successful, propose a guaranteed payment method

Payment Checkout

Fraud Detection Tools

DeclinedPropose a guaranteed payment method

Declined Declined Declined

Authorisation request

FLEX 3DS

3-D SECURE

AUTHENTI- CATION

REVIEW RISK

SCORE

1

2

3

Take the next step

http://payment-services.ingenico.com/fraud

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