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Case study: Spicejet curbs fraud in online transactions

Since its launch in May 2005, SpiceJet has single-mindedly focused on becoming a key player in the highly-competitive low-cost airline segment. And today SpiceJet is India's second largest low-cost carrier in terms of market share.

To get to its current position, SpiceJet needed to run on a lean operating model. So it integrated processes and technology to save operating cost and one of the best ways of doing that was enabling customers to book tickets online. Today, about 70 percent of the carrier's business comes via online credit card transactions. But with incidents of credit card fraud increasing steadily, SpiceJet saw dangers to its business: the revenue loss from such fraud was making a dent in its razor-thin profit margins.

Alarmed by the scourge, Virender Pal, CTO, SpiceJet, began scouting around for an automated, advanced and flexible online risk management solution that could screen online transactions efficiently. There was only so much the company's manually operated fraud control unit could cover. "We were losing between Rs 50-60 lakh per month. And when you operate in a fiercely competitive low-margin segment, such a significant revenue loss can make you bleed. This also impacted the credibility of our website," says Pal. "We needed real-time verification of credit card transactions. The thrust was to make Spicejet.com a secure place."

Pal found a solution in Decision Manager, an automated online risk management application. Based on a set of rules SpiceJet defines, Decision Manager examines each transaction, and determines whether an online order should be accepted, reviewed or rejected. In addition, the rules can be updated at any time using a simple interface, allowing SpiceJet to continually adapt its strategies as scam artists change theirs.

Tight timelines was a tricky issue, especially with fraud rates and chargebacks escalating with every passing day. But the Rs 10-lakh project went live in February 2008 and the implementation has helped SpiceJet automatically screen credit card transactions reducing the burden of manual intervention. Within two months of the project's deployment, SpiceJet's chargeback rates plummeted from between 4 to 5 percent to 0.002 percent. "It has not only secured online transactions but also boosted the credibility of our website," says Pal.