All Aboard The Authentication Train – A Look At Amtrak’s Journey

While advancements to digital commerce and authentication technology have revolutionized a number of industries, one where their influence is perhaps most visible in the travel sector. The ease and efficiency of purchasing airline tickets and transit passes digitally – and storing them as eTickets – means that the majority of travelers now begin their journey with an online transaction.

But because cutting-edge mobile devices have achieved ubiquity in today’s society, it’s easy to forget that most people weren’t perpetually equipped with smartphones and tablets less than a decade ago. As a growing number of people traded in their antenna-sporting flip phones for sleek, Internet-accessible mobile devices, however, airlines pioneered the shift toward digital payments and passes. Other major players in the travel industry, like Amtrak, had no choice but to get on board (so to speak) or get left behind.

Rick Ziolkowski, a payment authentication specialist for Amtrak, explained that the past few years have been a period of intense growth and progress for the railroad’s ticket buying and payment authentication procedures. Using best practices from successful airlines as a point of reference, the company allowed digital progress to influence its own evolution.

“Two key advancements were: Migrating from traditional paper tickets and ticket counter at point-of-sales towards eCommerce. So, building out our Amtrak.com site, launching a mobile app – across all platforms. And almost overnight, we grew from primarily point of sale to an eCommerce [business],” Ziolkowski explained.

Along with giving consumers the ability to purchase tickets online, the train service also made the shift to accepting digital tickets.

“Five years later, we’re now a card-not-present eCommerce [company]. In addition, we also moved from paper tickets toward electronic tickets and eVouchers – adopting best practices from the travel industry to make it as seamless and [as minimally] intrusive for the customers as possible, and [to give] them the most tools and resources,” he said.

Of course, adopting new technology also means taking on a whole new set of risks. For Ziolkowski, who was tasked with building out the company’s fraud risk management program, offering paperless tickets and transactions meant progressing beyond “first generation fraud prevention tools” toward more sophisticated solutions using multi-factor authentication.

Using the expertise he acquired during his time at Citibank, Ziolkowski searched for solutions that reflected his top payment risk “philosophy.”

“This is really the key to a lot of my [decisions] for fraud management – the issuer will always have the greater relationship with, and the greater of the consumer behavior, than any merchant,” he explained. “[Merchants] don’t have the greater insight that the issuer has – the payment patterns, the overall purchase behaviors, etcetera. Most people just use one single card for their consumer behavior. Even if it’s a corporate-commercial card, the issuer will always have the deeper relationship and therefore trump any merchant’s approval decision. The more data a merchant can provide to the issuer, the greater the issuer’s ability to improve their approval rates. …”

Following this ideology, Ziolkowski incorporated 3D Secure technology as the organization’s fraud prevention tool. The solution approaches digital authentication by flagging anomalies when consumers, issuers and merchants all come together, online, to do business.

“3D Secure’s greatest asset or value is also its biggest secret. This enhanced authorization data is a game-changer,” he said. “Regardless of whether the customer is challenged, all 3D Secure transactions have the ability to present additional data to the issuer such as device ID, IP address, billing phone number and email address. The issuer is going to make a much better decision identifying fraud versus a good transaction.”

Because 3D Secure allows issuers to determine the validity of payments, merchants can confidently accept higher numbers of transactions without increasing their opportunities for fraud. The evidence can be seen in the results of the Chargelytics Consulting and CardinalCommerce case study, which took a closer look at Amtrak’s use of 3D Secure. According to the study, Amtrak saw a 2.4 percent increase in overall authorization rates and a 76 percent increase in transactions approved by the merchant over a 13-month period, from April 2014 to May 2015. Update: Amtrak is now processing 100 percent of its transactions through 3D Secure and their acceptance rate on issuer approved transactions is over 99 percent, while seeing a fraud to sales rate below one basis point. “In all of my years in the payments industry, I have never seen an authentication solution that significantly reduces fraud while also greatly increasing approvals. This is a great competitive advantage for Amtrak.”

Having Visa, MasterCard and the other payment brands provide the fraud liability shift to merchants gives 3D Secure an advantage that no other fraud tool or risk model can provide. It is unique that 3D Secure authentication code is embedded in the authorization message, preventing issuers from even trying to submit a chargeback. Amtrak has optimized their authentication by reading the code to determine when they have liability shift, and then bypassing all legacy fraud screening rules for a seamless, low friction customer experience. By the end of 2016, Discover and American Express will also be proving liability protection in the U.S. market. With near 100 percent fraud loss protection, merchants can give full attention toward improving approval rates. “With Amtrak using proprietary Consumer Authentication modeling from CardinalCommerce, our customer insult rate has nearly disappeared.”

Looking toward the future, mobile wallets appear to be the next major player in the authentication solution game. Ziolkowski explained that these multi-factor technologies are bound to grow in popularity, largely because of their synergy with smartphones, which are many consumers’ primary purchasing tools.

“The phone itself is something [consumers] have, and, more and more now, something they are,” he said. “Whether it’s the fingerprint scanner or the MasterCard facial recognition…that device now becomes multi-factor, actually tri-factor…it’s something you are, something you have and something you know.”

Still, Ziolkowski believes this technology will be most effective when used with 3D Secure rather than in place of it. Because 3D Secure’s ability to leverage the issuer/consumer relationship has helped shape Amtrak’s journey from paper tickets to eCommerce, he attributed much of the railroad’s digital transition success to the solution.

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