In Leveraging Interceptas for a new fraud threat: gift card programs, Brandon Adams, Manager of Ticketing Operations at Southwest Airlines, said he was forced to concentrate on a fraud trend he saw rising in the company's online gift card purchase program. Fraudsters were taking advantage of the speed of online fraud to circumvent Southwest's antiquated controls.
Since 2005, when Southwest started selling gift cards, the airline had used an in-house manual review process for tracking fraudulent gift card activity. Adams said the process was successful, blocking hundreds of thousands of dollars in fraudulent activity each year, until 2011, when Southwest realized it had a problem.
Adams explained that 90 percent of the airlines' gift card business occurs online utilizing a virtual gift code system. Gift cards are redeemable online using that code, which opens up the possibility that initial purchases can be made using stolen credit cards, and the returned codes can be quickly redeemed before the fraudulent transactions are caught. "We were at the potential of losing a million dollars a year," Adams said.
Southwest's realization led its operations department to seek a more automated solution. The airline turned to American Express Co.-owned Accertify, the same fraud prevention company Southwest used since 2008 to verify its Internet and phoned-in ticketing reservations. That program had proved to be a success, achieving for Southwest a sustainable 50 percent online fraud decrease over a five year period.
In response to Southwest's gift card fraud problem, Accertify proposed a plan to enhance the tools already in place at Southwest and also utilize historical activity to identify and create new alert rules within the system to match and monitor unusual purchase and redemption behaviors. Additionally, by establishing an automated process to track gift card purchase and redemption activity, the 24-hour manual review time was decreased to a 2- to 4-hour period.
In the webinar, Accertify's Director of Managed and Professional Services, Mark Michelon, said the solution, deployed within a month, began working immediately and radically increased Southwest’s ability to isolate and fight against fraudulent gift card purchases.
Today, Southwest's review staff can now quickly identify a suspected fraud case, and in many cases, stop a stolen gift code from ever being redeemed. The correlations made between questionable purchases and redemption behaviors also shed new insights on Southwest's other business channels, enabling them to identify a fraudster's next move. Adams said Southwest was also able to reduce its gift card review staff from 10 to two dedicated experts, saving the company thousands of dollars in overhead, without compromising the program.
In January and February 2012, Southwest's 10 fraud specialists prevented about $190,000 in gift card fraud. But fast forward a year later, and in that same time frame, the Accertify system, even with reduced staffing, accounted for over $450,000 in fraud prevented, Southwest said.
Perhaps the most important benefit is how the shortened review process gave Adams' in-house risk staff a birds-eye view of the fraud perpetrators. This virtual spotlight sent the would-be perpetrators scattering, immediately lowering the overall number of attacks to the program. Reflecting on the victory, Adams said, "Within five weeks, we hit the fraudsters so hard, they basically stopped coming to our gift card space."
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