While we are still exploring a return to ‘almost normal’ life after many weeks of strict lockdown, it is remarkable to see how this crisis has impacted almost every business market.
The new dilemma facing airlines
Air travel is probably one of the most affected industries, with the International Air Transport Association (IATA) estimating a decline of up to 90% in activity. With the majority of planes grounded, the first reaction of adversely impacted airlines was to suspend many of their internal services to limit their operational costs. But reduced activity is not the same as all services grinding to a halt. Cargo flights continue, and even though the flow of travellers has decreased considerably, the fact remains that some people continue to move about. This presents a dilemma: bearing in mind that fraud rates tend to increase and genuine buying habits change during a crisis, how do airlines ensure business continuity while reducing costs and the fraud rate as much as possible, all in the context of a reduction in internal fraud management teams?
By relying on external fraud providers, especially counter-fraud specialists, some airlines have been able to continue to conduct business. Indeed, experts in the field are best placed to quickly analyse and identify suspicious transactions. This is especially important as new COVID-related customer behaviours are triggering alerts in conventional anti-fraud systems. A good example is repatriation, where the customer buys a one-way flight (and not a return) and the person buying the ticket may not be in the same country as the traveller who is flying. Traditional fraud rules would have flagged this up as suspicious behaviour, resulting in a rapid increase in declined transactions. That’s why some merchants have decided to bring in specialised external service providers who understood the airline’s core business to help them maintain a low fraud rate and reduce costs.
Stock optimisation via fraud management
With panic-buying accompanying the arrival of the pandemic in different countries, distributors have regularly found themselves out of stock of essential products (masks, alcohol gel etc.). This has had a knock-on impact on at-risk populations — an untenable situation for these merchants.
That’s why some essential distributors have begun to utilise fraud solution providers to control stock and protect the most vulnerable members of society. By adapting the rules of their order analysis tool, they are able to limit the quantities of certain high-demand items available for purchase, helping them to maintain stock levels. This inventory optimisation via an anti-fraud tool is used by online merchants, as well as sanitary product chains. It guarantees access to products for the people who need them and limits the impact of some customers buying in excess as a result of compulsive buying habits.
The rule changes must be tracked very closely by experts because some customers, who have every intention of paying, start to adopt behaviours typical of fraudsters when trying to purchase large quantities of limited-availability products. For example, they create multiple accounts with the same address, masking their IP address and erasing device data. Merchants must decide how to handle this new ‘legitimate fraudster’ customer category.
Changing payment methods
Before the crisis, some merchants had already started to modernise their payment systems, while others have had to address the challenge urgently. Omnichannel has accelerated: high-street retailers, for example, have rapidly implemented remote payment solutions, such as contactless or online payment, to ensure continuity of services while respecting the social distancing measures required by the authorities.
Some retail and luxury brands have acted quickly to deploy a telephone payment solution during store closures. This has allowed them to maintain their close relationships with their customers and increase their sales, despite all the current uncertainty.
Another interesting example is that of a car maintenance company, which very quickly developed a contactless payment solution with its partner. The customer can book services at a point-of-sale and pay via a link sent to their phone, all while remaining in their vehicle.
These examples neatly demonstrate how digital transformation in business has become a vital survival measure during the COVID-19 crisis. At the heart of this transformation, payment systems are adapting and evolving to ensure businesses can maintain customer relationships and continue to achieve revenues.
About Nicolas Engel
Nicolas Engel has worked in the French fraud and payment industry for 18 years, building his experience with global merchant companies across a variety of industry sectors including telecoms with SFR and Virgin Mobile, and health and beauty with Sephora. He is now Director of Managed Risk Solutions for CyberSource.
About CyberSource
CyberSource is a global, unified payment management platform built on secure Visa infrastructure – with the added insights and security of a USD 479 billion global processing network. Put simply, we help merchants and acquirers to fulfil their digital commerce ambitions. We do this by empowering our customers to create payment experiences that help spur growth and innovation, safely and securely.
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