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The last couple of years have seen the global payment fraud landscape shifting significantly and at an accelerated pace. The post-pandemic period has brought about a 20% increase in the value of online transactions, driving e-commerce growth for many multi-channel merchants, including online travel agencies (OTAs) and hotels. Yet the flip side of this shift has been the steady increase in the threat of digital fraud, creating a complex landscape of fraud liability and data ownership for all parties involved. The wider e-commerce fraud losses are expected to reach £37 billion* by the end of 2024, highlighting the growing vulnerability of businesses operating online.

One of the primary risks facing the hospitality industry is card testing. This type of fraud often arises from deceptive intent, with fraudsters intercepting card data and using hotel reservations to test the card's validity. This results in no-shows and subsequent chargebacks when the room is then charged to the compromised card, leading to financial losses for hotels.

Adding to this challenge, the industry is also experiencing a significant rise in "friendly fraud" chargebacks, with up to 75% attributed to this issue. This occurs when a legitimate cardholder disputes a charge, often after their stay, claiming service errors or unauthorised use. Chargeback disputes over services or perceived errors are a major drain on revenue and a serious threat, with one 2022 study by Ethoca and PYMNTS.com finding that as many as 71% of e-commerce transaction disputes were initiated due to service errors.

High chargeback rates may lead to lower authorisation rates, as an increase in disputes that are coded as fraud can lead to false declines. Hotels are particularly vulnerable, with an estimated £150 billion in revenue lost annually to fraud and chargebacks. Every £1 lost in chargebacks alone equates to a £3.75 revenue impact due to fees, increased overheads, and other costs. Merchants with consistently high chargeback rates may face consequences such as higher transaction fees, fund withholding, or even suspension of their card services, which underscores the importance of addressing disputes promptly and effectively.

Protecting Your Hotel from Fraudulent Payments

While online fraud poses a significant risk, traditional card fraud remains a persistent threat to hotels, especially given the prevalence of card payments in this sector. The practice of MOTO payments within the hospitality industry, where bookings are made over the phone or through email, creates a unique vulnerability for hotels. These transactions lack the security measures offered by modern technologies like 3DS, leaving hotels exposed. The reliance on card payments, combined with the projected global card fraud losses of £27.4 billion* by 2024, particularly heightens the risk for hoteliers. Europe, especially the UK, Germany, and France, account for a substantial portion of these losses. This highlights the need for hotels in these regions to prioritise robust fraud prevention strategies.

As hoteliers, your priority is to provide exceptional service to your guests, not to predominantly contend with the consequences of fraud. Guestline understands this, and our award-winning GuestPay platform is built to minimise fraud risk with a comprehensive suite of security measures.

• Targeted Fraud Detection: Using sophisticated algorithms and tools to identify suspicious transactions and patterns, Guestline system is tailored to the hospitality industry to ensure proactive detection and mitigation measures.
• Promoting Secure Payment Options: The use of secure payment options like Apple Pay and Paybylink, which are readily integrated into Guestpay, helps decrease the risk of fraudulent transactions and help shift the fraud liability away from the hoteliers. When MOTO or CNP transactions are necessary, hoteliers should always request ID or the card used at check-in to ensure additional security.
• Automated Chargeback Notifications: Through the GuestPay Hub, hoteliers receive timely notifications about potential chargebacks, enabling proactive and timely action to reduce financial losses.
• Clear Fraud and Decline Codes: Guestline provides clear and informative codes for declined or fraudulent transactions, helping hoteliers understand the reason behind the rejection and take appropriate action.
• 3DS Compatibility: Guestline's platform integrates the latest 3DS authentication protocols, adding an extra layer of security for customers to verify their identity during online transactions.

You might also like:

• "Apple Pay, A Catalyst for Growth in Hospitality"
• "What is PayLink and How Does It Benefit Your Hotel Payment Processes"
• "Case Study: Duck Bay Hotel"

Guestline's Anti-Fraud Framework: A Comprehensive Approach

Hoteliers trivialise fraud at their peril. The fraud landscape is evolving with more sophisticated attacks, such as account takeovers, and expanding into non-payment areas like loyalty programs. This shift, along with the prevalence of social media, is upping the stakes for the industry, with relatively minor incidence now having the potential for much wider reputational impact.

With years of experience in hospitality, Guestline offers comprehensive solutions to enhance hotel operations and mitigate fraud. Hoteliers should develop a long-term, proactive anti-fraud framework. Here are our key recommendations:

• Be Strategic: Establish a clear ownership of fraud metrics across all relevant teams, including fraud prevention, payments, customer operations, and finance.
• Accurate, Compliant Data: Maintain a secure, centralised and compliant system to manage fraud-related data. This ensures accurate information is accessible to relevant teams, improving your hotel's ability to defend against fraudulent claims while protecting data privacy.
• Maintain Hygiene: Hotels must enforce a risk-based 3DS authentication approach on e-commerce transactions or use secure payment links as a safe alternative to MOTO, where possible.
• Fight Tech with Tech: As fraud becomes increasingly sophisticated, Guestline continuously invests in hospitality technology, leveraging experience and expertise to stay ahead.
• Look for Patterns: Leverage behavioural analysis and establish fraud measures that go beyond just payment authorisation. Regularly analyse emerging fraud patterns to understand their impact on your hotel.
• Engage with the Experts: Stay updated on the latest fraud prevention measures and ensure your systems comply with the highest security directives.

By partnering with Guestline and leveraging our payment technology and years of industry expertise, your hotel can focus on delivering exceptional guest service while effectively managing and mitigating the risk of fraud.

Organization
Guestline Ltd
https://www.guestline.com/
Guestline House, Shrewsbury Business Park
Shrewsbury, Shrewsbury
United Kingdom
Tollfree: 0800 413557
Phone: 44 (0) 1743 282300
Email: sales@guestline.com

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