The $755 billion online travel industry is a honeypot for bad actors looking to use stolen payment credentials to purchase vacation packages and resell them for profit. But combating fraud often comes at a cost, as onerous security protocols may alienate legitimate customers. In this month’s Digital Fraud Tracker, Eric Lorenz, Priceline’s vice president of finance operations tells PYMNTS how the online travel agency leverages artificial intelligence to identify risky transactions without inconveniencing legitimate customers.
Travel has been one of the industries most affected by the internet’s game-changing power over the past twenty years. Brick-and-mortar agencies became almost completely forgotten as vacationers took to the web to book travel arrangements.
The increasingly digital nature of travel planning also opened new vulnerabilities to digital fraud. Stringent security protocols may stop hackers, but overbearing protections cause online travel agencies (OTAs) to risk losing legitimate customers. This struggle is all too familiar for OTAs like Priceline. In a recent interview with PYMNTS, Priceline’s Vice President of Finance Operations Eric Lorenz discussed the various fraud threats facing the company and how it fights them without alienating legitimate customers.
“We’ve spent more than 20 years selling travel online to millions of customers, and in that time, you’re building lots of trust [with] these individuals,” said Lorenz. “And what we’ve learned is that you can lose that trust in a matter of minutes with a simple mistake.”
How fraudsters fly under the radar
Travel booking websites like Priceline are a honeypot for hackers who hope to execute their schemes amidst the thousands of normal booking transactions that occur every day. Lorenz said these heists take a variety of different forms but largely revolve around using stolen payment information to score free travel arrangements that can then be converted into cash.
“One common activity that we see that we worry about is what we call black market resell,” Lorenz said. “Fraudsters will use stolen payment credentials to book on a travel site, and then they’ll try to resell that booking somewhere else at a lower price. Some of them will go as far as setting up temporary travel agencies, or they’ll even go as far as [to] create fake sites that mimic the world’s biggest OTAs just to lure customers in.”
Other fraudsters take a simpler route — purchasing airline tickets or travel packages and then attempting to refund them on their own credit cards. The scheme is essentially an online version of shoplifting: going back to the very stores that were victimized and returning the stolen goods for cash.
AI is key to protect bookings
The core of Priceline’s fraud-fighting solution is a sophisticated artificial intelligence (AI) system that identifies risky transactions and flags them for further analysis. The system tracks a number of variables to determine if any given customer is suspiciously interacting with their website.
“For example, how you populate credit card information [can be informative],” explained Lorenz. “If there’s a behavior that resembles copying and pasting, that sort of feels like the cards have been stolen from an inappropriate place and are probably in the wrong hands.”
One unique challenge Priceline faces is the multitude of airlines, cruise lines, hotels and other business partners they have that can be compromised by fraud and potentially negatively impact their customers, even if the company itself was not victimized. Priceline, as the most customer-facing part of the network, could bear the blame even if not at fault, making it critical that Priceline keep tabs on suppliers.
“We stay closely connected with our suppliers and payment networks so that we can see what’s happening on the demand side of the equation,” Lorenz said. “All of this is super critical to us because fraud is not intrinsic to any particular industry. Fraud rings operate in any number of [industries]. They ultimately show patterns, and when they do, these patterns help us to strengthen the machine learning.”
AI systems are only as smart as analysts program them to be, however. Priceline supplements its AI with human analysts to keep the algorithm up to date and ensure it can anticipate any future threats. These experts continuously review the AI’s output and provide feedback for the processing algorithms on a daily basis.
Balancing business and pleasure
Equally as important as making sure fraudsters do not complete their schemes is making sure legitimate customers do not have to undergo onerous security checks. One of the primary goals of stopping fraudsters, after all, is to protect profit margins that can be just as damaged if customers decide to leave for a more welcoming company.
“We’ve seen some companies go out of their way to try to capture as much information from a customer as possible, making them jump through many hoops before they can actually get to the product that they’d like to purchase,” Lorenz noted. “The downside is that customers will feel like they’re not being trusted, and if we go too far, [that will] scare customers away entirely.”
The AI-driven system helps in this regard. Not only does it surgically detect and flag fraudulent transactions, it can also anticipate customer queries and provide targeted recommendations.
“In general, we use the AI to help customers find the most ideal matches with … what they like to buy,” he said. “We help them when we provide our search results, using AI to provide an optimal match to what the customer might be looking for.”
Lorenz hopes that Priceline’s AI predictive capabilities can eventually become so sophisticated that customers can complete almost all of their transaction experience with a single click. Such a comprehensive overhaul of the travel-booking experience will require continued fraud prevention efforts from the company.