Ai Editorial: Fraud - Hotels Big Dirty Secret!



Ai Editorial from Chris Staab, Managing Partner, Airline Information


According to a 2010 article in the New York Times, hotels account for nearly one third of the world's cases of credit card fraud! And by most accounts, the situation has not improved in the last 3 years. How long before credit card acquirers, the credit card networks, government regulatory agencies and hotel customers demand change from the hotel industry on how it handles credit card data?

The root of the problem appears to be the hotel franchise model, leading to a lack of credit card security and poor procedures. Maintaining brand-wide credit card security standards when there are thousands of franchises, many of whom have properties in multiple brands, has proved an impossible task to date. How often have you seen hotel front desks making physical copies of your credit card at check-in, as well as asking for a copy of your ID or passport? This information can then easily fall into wrong hands and is hardly PCI compliant. Combine this with low pay leading to the temptation for hotel staff to steal card and personal data and it's a card security nightmare! A particular target is the cards of American customers who don't have chip-and-pin (EMV), making them easily cloned for card present fraud. Corporate wide, hotel chains have also had a history of poor data security, having faced several well-publicized data breaches of card information.

I am a perfect example of this problem. In the last 5 years, I have been the victim of credit card fraud on half a dozen occasions- all stemming from the use of my card at hotels. Now when I travel to many countries, I use my card only at the hotel front desk, where it is required. Two years ago in Chile, I only used my card at check-in to a 5-Star major international hotel brand property and my card was compromised. The previous year, I fell victim to the well-publicized Wyndham hack and my card was used to purchase $10,000 in furniture in China. Unfortunately, I also had organized several events in Wyndham properties (including the Airline & Travel Payments & Fraud Summit!) around the time of this breach of security and many of our customers were also affected.

So, returning to my original question, for how long can hotels contribute more to global credit card fraud versus any other industry?

The issue may be resolved as hotels themselves are also increasingly becoming victims of fraud, which will hopefully result in better procedures. Hotels face friendly fraud in the form of charge-backs at very high rates, while online the problem is increasing quickly, as hotels are offering more and more prepaid rates via their own websites. This has made them increasingly the victims of the use of stolen credit cards. 

Hotels as both victims and contributors to fraud will be discussed at our upcoming ATPS & Fraud Events in Mexico, Bangkok and Chicago and I look forward to seeing you in one of them. You can find out more about all of these events at www.AirlineInformation.org/events. And, think twice the next hotel you check into a hotel about the security of your credit card details!
 

Ai Editorial: Convergence between Ancillary Revenue & Loyalty


Ancillary Revenue & Loyalty will converge at Mega Event'13, 13-14 November 2013 in Vancover. (Photo: Mega Event'12)

Ancillary Revenue and Loyalty: Silos, Collaboration or Tolerated Co-existence?

Travel related insurance and assistance products, may be one of the oldest sources of airline “ancillary revenue”, and simultaneously, one of the most neglected products in “loyalty” programs of those same airlines. Why? One overarching reason is the way airlines manage their “ancillary revenue” & “loyalty” programs. It was clear, at the recent “Mega Event” in San Diego, that across the board, there are a wide variety of views and operating practices. Keep them separate & siloed was eschewed by several speakers. Integrated and collaborative was there too; but tolerated co-existence (with token co-operation) appears more the norm. In many cases, what’s working well in one company’s program, may have low, or no visibility, even within the same organization. Particularly a non-glamorous category like insurance.

A second reason may be that the manager of the mature, highly profitable, low maintenance, “ancillary revenue” travel insurance program sees no benefit or value (personal or corporate) in promoting the product to another department (“loyalty”). The incumbent underwriter, too, may be complicit, not wanting to risk another department (“loyalty”) getting interested in insurance, then going to RFP, with the possibility, that they (the incumbent) are unsuccessful, and a second underwriter is selected. These scenarios are probably not conspiratorial, it may simply be a case of “why make work for ourselves, when what we have, is doing well”. So if the “loyalty” program is busy with “loyalty”, and “ancillary revenue” is not championing the creative use, by “loyalty”, of travel related insurance and assistance – what happens. Nothing happens, particularly in those companies with the siloed or tolerated co-existence philosophies.

Why should airlines care? What benefit can the creative use of travel related insurance and assistance bring to a “loyalty” program. It depends. There are a very wide range of insurance/assistance products and features available in the marketplace, and they can customized to be revenue generating, or revenue neutral, or provide member benefits at a cost. It depends on the overall strategic and merchandising direction of the “loyalty” program. It depends on a willingness to investigate, review product(s), strategize and test.

Within the current “ancillary revenue” model, with most airlines, less than 10% of ticketed passengers are purchasing the travel insurance/assistance offering. It’s therefore highly likely, relatively few of the airline’s “loyalty” members are currently buying the insurance product. Adding 2 or 3 basis points to the insurance sales will generate millions of dollars of ancillary revenue. Surely “loyalty” should at least be creating programs that a least showcase the insurance category.

Better yet, create a portfolio of complementary products that in addition to educating and informing, also generate revenue within the “loyalty” program.
 

This editorial was contributed by:
Frank Shellabear

Chief Consulting Officer, FS Consulting Services
Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it.

 

Ai Editorial: Dual Co-Brands & Improving Loyalty Revenues



Dual Cards - is your loyalty program leaving revenue on the table?
Guest editorial from The Mallett Group

Over the past few years Dual (Jewel/UK lingo) card offerings have begun to be reluctantly embraced by the merchant networks to address acceptance issues. For those of us who have not encountered dual card offerings, they are co-branded credit card products that offer not one, but two network branded cards tied to a single consumer account.  Meaning there may be a Diners Club card paired with a MasterCard that is placed into market within an airline co-brand offering.

Why:
Because the dual network offering allows the issuer to garner all spend due to acceptance restrictions in certain markets.  For example, Amex has more limited merchant acceptance in the UK market so a companion Visa is offered to capture spend that otherwise would be relegated to other card products in wallet.  Meaning it is better to have partial share than no share at all.  Counter intuitive upon first blush, but potentially sound as one never wants to be late to the party.

Where:
We have seen these offerings in the UK – with the likes of Virgin Atlantic, as well as with airlines in Spain and India. And, watch this space as there are more to come!

Challenges:

  • Ego: When was the last time die hard competitors played together and were happy?
  • Commercial:  Complex negotiations to produce a consumer value proposition (CVP) that is acceptable to both networks
  • ROI: Projections of spend that relate to back-end compensation to the network, issuer and ultimately the brand sponsor
  • Marketing: Messaging correctly to acquire and retain.  Customer confusion can be a concern
  • Earn:  Internal network requirements place restrictions on enhanced and devalued mileage/point earn ratios
  • Benefits:  What card benefits get attached to what network offering
  • Negotiations:  How to please some of the people some of the time
  • Contracts:  How agreements are structured and how the money flows including VAT in some markets
     

Outcome:
The Dual Card offering can be a powerful measure to employ in a less than ideal market situation.  However, one needs to navigate the obstacles in a sophisticated manner.  It takes more than the average plug and play solution, but in the end it can provide a robust product to consumers and reward the brand with enhanced commercials.

To learn more about loyalty co-brands and dual cards in particular, please contact Marc Berman, President, The Mallett Group by emailing him directly at This e-mail address is being protected from spambots. You need JavaScript enabled to view it.   He will also be at FFP Spring at the Freddies in Washington DC on 25th of April as well as at the Co-brand Partnerships Conference running as part of Mega Event.  Details of both events can be found at: www.AirlineInformation.org/events
 

Ai Editorial: B to B Loyalty



B to B Loyalty Programs- What it is, What it can be……

Guest editorial from The Mallett Group

There is a growing trend of ancillary loyalty rewards program offered by airlines. British Airways On Business and United Airlines' Perks Plus are just two examples. United also sponsors Pass Plus which offers a pre-paid program geared to the smaller business market.   

Why target small and medium business in loyalty? Because business is opportunity and these business segments drive revenue for airlines without the complexities of complex negotiated rates and services enjoyed by larger companies e.g. the recent announcement of Delta’s corporate check-in recognition program, currently in a test phase.

A small business program makes sense. It rewards the owner or management of the company with benefits garnered via the travel spend of its employees. This can take the form of free tickets, upgrades, lounge passes and status. Enrolled employees continue to earn their own set of benefits while management reaps the rewards of increased spend to the carrier.  Win/Win/Win!

Another aspect of the small business loyalty development is the attachment of a business reward credit card. These card programs, sometimes not well promoted, tend to attach more spend related benefits like other individual co-brand cards yet on a B to B level.  These co-brands extend into the hospitality space where companies very often have a card designed specifically for small business.

The networks are also in this game via their own programs most notably the Amex Open Program, as well as MasterCard’s Easy Savings business program. Here the cards are packed with discounts and ancillary services that make them a formidable companion to a personal card product.

Are these programs too mundane? In our view B to B loyalty programs are still under-developed and under-adopted. They can be tuned and enhanced to drive more engagement and loyalty.  This will be a focus at the upcoming Co-Brand Parternships Conference at Mega 2013 in Vancouver.  Join us and be challenged!

Coming Next Month - The evolving field of neuro-economics: Neuro-economics, simply put, is the study and implementation of what motivates, captures and creates call to action behaviors via targeted marketing process. It drives spend, it creates traction and drives loyalty. When employed in the consumer space it creates a hierarchy of engaged customers.  How can we speak to the brain and make it work for us?  Manipulative, perhaps but employed by advertisers every day. Can loyalty can tap this evolving science?  Stay tuned! 


About the Author:
Marc Berman is the Chairman of Airline Information’s Mega Event Co-Brand Track.  He is the president of The Mallett Group, a consultancy in loyalty and relationship marketing.  He is also a practicing psychotherapist maintaining a clinical practice in Dover, Massachusetts. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it.