Is fraud this year’s growth industry?

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2512343Recession spurs fraud growth

In the world of online ticket and merchandise shopping, fraud is a prevalent player that can cost your business serious amounts of pounds and jeopardise your reputation; while protecting your business and your customers’ privacy can also add significant cost to your bottom line – costs that could be used to build and market your merchandise and ticketing sales. The current economic climate affects fraudulent behaviour in more ways than one: as financial reverberations ripple across market sectors, the temptation to commit ‘friendly fraud’ is greater than ever. Also fraudsters tend to become more active during difficult economic periods given the higher demand for products that they can obtain fraudulently – which are usually products that can be easily monetised. These factors combine to further exacerbate an already difficult fiscal environment for businesses.

A lucrative playing field

Over the last few years the live events industry has seen unprecedented growth and popularity.

Often the demand for tickets exceeds supply, as event owners and promoters tend to price tickets below true market value for a variety of reasons, ranging from maximising on-site revenue from refreshments and merchandise, to building and maintaining a loyal fan base. The resultant excess demand creates the opportunity for secondary selling at highly profitable prices – making the sporting events environment a lucrative one for fraudsters.

A study carried out in 2006-07 on behalf of DCMS found that consumers often do not easily distinguish between legitimate and unlawful sellers, and there have been cases where consumers have been exploited by unscrupulous operators.**

Given the changes in this market and the unrestricted nature of the Internet, it is important that businesses consider what measures could be put in place to help mitigate fraud, while also helping consumers understand the degree of risk involved in online ticket purchasing.

Passionate fans and fraudsters – a risky combination

Successfully procuring tickets to a top match is a thrilling experience for many fans. After years of practice, sport fans know how to gauge the ticket touts standing outside the arena, but what about the new resellers that have surfaced online in the last few years? The Internet is economical, convenient and always open – 24 hours a day, seven days a week and the nearly 70 per cent* of the British population using the Internet results not only in an increase in online ticket sales, but in fraudulent purchases.

With the deepening recession, sport fanatics are no longer spending the big pounds with the ticket touts outside the stadiums, racecourses or venues. Instead, they are becoming more price-conscious and are looking to the Internet to find the best deals.

However this increase in online bargain hunters also attracts an escalating number of virtual ticket touts looking to take advantage of individuals’ passion for sport and their easy willingness in trusting what may appear to be a legitimate seller or site. Fraudsters tempt keen fans with alluring opportunities to attend favourite matches or purchase beloved sports items, which may suspend consumers’ judgment when presented great ‘offers’.

According to an Internet Retailer report, event tickets are one of the five most common products purchased online; however, when buying online, people often disregard the due diligence they normally would take if they were shopping in person. When buying tickets from the club or venue – or through an authorised ticket reseller – precautions should be taken on the Internet at all times and even more so when publicly using the Internet.

Sporting arena ripe for fraud

The reality is that fraud is rampant within the sporting arena sector and is simply disguised by the online growth trends that are being experienced in this market sector. In the face of continuing changes in the market – including demand, technological changes and how consumers buy and sell tickets and sporting items – fraud issues weigh heavily on this industry. Retail Decisions, a world leader in card fraud prevention systems has seen this happen with the increase of prepaid telephony through the ‘90’s, and the explosive growth of e-commerce retail at the turn of the century.

When searching for the right payment processor to alleviate these issues, you want to look for one that has a vested interest in fraud reduction. They should be a stable presence in the industry, savvy to online payments (online games and recurring billing), and possess a wide range of partners that assist in risk mitigation and Payment Card Industry (PCI) compliance.

The good news is that with the right combination of experience and tools, fraud can be managed to meet the requirements of the Associations and revenues can be maximised for further business expansion.

Ultimately, as an online service, you want to focus on the creativity and marketing of the sport – not payment fraud and billing management. You need to accept a variety of payments that can be accepted easily, while at the same time mitigating chargebacks and fraud.

It can happen to anyone – support the fans

Being defrauded of money and not receiving tickets is a crushing experience, as is paying £800 for tickets that should legitimately sell for £100, or even buying tickets to a sporting event and upon arrival at the arena, being told the tickets are fake.

Such is the situation that occurred with officialtickets.net, a fraudulent ticket Web site hosted from Israel, which was recently closed down after 18 months of investigation. Internet ticket touts made hundreds of thousands of pounds each season by selling tickets that often never arrived to top matches.

It cannot be stressed enough that fans need to be careful when buying tickets online. The sporting industry would benefit from adding information on their sites on how to avoid exploitative online practices from those who want to undermine the ticketing systems and capitalise on people’s love of sport.

* According to World Internet Usage Statistics News, www.internetworldstats.com/stats.htm

** According to the Department for Culture, Media and Sport, p. 9 (1.2),

http://www.culture.gov.uk/images/consultations/Ticket_Touting.pdf

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