Travel Agency Merchant Account | Handling Chargebacks
The specific timing of payment transactions in the travel industry is the main reason why the industry is classified as high risk. A travel agency merchant account allows tour operators & travel agents to accept card payments via acquiring banks to process advance payments.
All travel agencies, tour operators and booking agents accept secure payments through a virtual terminal or payment gateway for flights and hotels weeks and often months ahead of time.
People make these bookings or travel plans with the best of intentions, but with plenty of time in between, there is a lot that can go wrong.
A couple that had planned to visit Bali in 3 months could decide in 2 months that they were not meant to be together.
A Mauritius family vacation excitedly planned months ahead could be postponed indefinitely if a family member toppled off a ladder and sprained their ankle.
Alternatively, there are customers who forget what they paid for their travel plans. By the time these customers see the figures again, buyer’s remorse sets in and they want their money back.
Travel packages can occasionally be canceled due to unforeseen emergencies. Both the travel industry, tour operators, acquiring banks and merchant services providers are prepared for that.
This is why there is often a cancelation fee put in place to compensate travel-related merchants for making plans that are never used.
However, a customer who wants his money back at all costs will resort to desperate measures. This is why even though a cancelation fee is standard protocol in the industry, most people still try to avoid it.
A travel agent, tour operator or airline ticket seller with proper travel agency merchant account has the right to insist that the fee be paid. These terms and conditions are stated in the contract and duly signed. However, some customers remain unbothered and file a dispute with the card issuer regardless.
Banks and lenders know travel agency merchants handle big money vacations and process a high amount of transactions. These institutions also know customers can change their minds at the last minute.
In the event that a travel agency merchant cannot refund the money, it is eventually up to these institutions to repay the cardholder. This is an ongoing development that many of these financial institutions prefer to avoid.
Chargeback Problems for Travel Merchant Accounts – Advance Payments
According to reports, the travel industry accounts for 1 in 8 chargebacks. In addition, friendly fraud issuances are up 41% with travel agency merchants saying their operations have been badly affected due to the current state of affairs. Ongoing lockdowns, quarantines, vaccinations and mask requirements do not make things easier.
Nowadays, customers are more comfortable with demanding chargebacks for these reasons as they know they can get away with it.
This is not great news for travel related businesses as chargebacks can also cause the following problems:
- Lost revenue: Travel merchants & tour operators cover the cost of a canceled booking.
- Missed opportunities: Merchant loses opportunity to sell supplementary products and services.
- High overhead: Additional administrative expenses and credit card processing costs were never recovered.
- Expensive fees: Every chargeback accounts for a fee assessed by an acquirer for administrative expenses.
This does not end here because chargebacks add up over time. Once the chargeback-to-transaction ratio gets out of hand, the travel agency merchant’s account can be frozen or canceled permanently. If this happens, a merchant’s ability to accept payments will suddenly stop. This is why accepting various payment methods through multiple credit card processing companies is a must.
Travel Agencies Merchants Should Communicate Properly
It is important for travel merchant agencies to maintain strong lines of communication with their customers to minimize the number of chargebacks that they are getting.
Most cardholders are not looking to deceive merchants or take advantage of them. Many customers simply want their money back after canceling their travel plans without any pushback.
This is where the ability of a travel related merchant to communicate effectively is required. Good communication skills and simple customer service policies go a long way in preventing transaction disputes and chargebacks for these business types.
Payment transparency helps keep customers happy and prevents them from stirring up trouble. It starts with transparent policies that tell a customer how much they will be charged and what they need to do to steer clear of those extra charges.
Whenever a customer books a hotel or pays for a flight, a travel agency should always keep the customer in the loop by sending emails and attaching itemized receipts.
If the customer questions a charge, a support representative should not be difficult to reach.
Dealing With Friendly Fraud
There are ways travel merchants can fight illegal chargeback issuances. But to do so, hard evidence must be provided as proof to discredit the cardholder’s claim.
When travel companies pick up suspicious cases and subject them to further scrutiny, it is done through a process called chargeback representment.
The evidence must uncover the following:
- The actual cardholder submitted the transaction
- The cardholder agreed to the travel merchant’s terms and conditions at the time of payment
- All services paid for were provided and agreed upon
Ways to find these pieces of evidence include:
- Copy of cardholder’s identification (passport or driver’s license)
- Cardholder’s signature on important documents
- Imprint of the credit card used with the cardholder’s signature
- Email correspondence between airline/OTA (hotels etc.) and the cardholder
- Terms and Conditions document of the customer’s relationship with the travel agency and a detailed invoice of the transaction
These are just a few examples. Each chargeback case is unique and requires a different set of documents to contest a cardholder’s claim.
Travel agency merchant accounts can also use alert services like Rapid Dispute Resolution. This service tries to resolve a dispute before it develops into a chargeback.
Keeping Travel Agencies Safe From Chargebacks
A travel related payment processor that has the tools to accept card payments securely and minimize transaction disputes should be one of the first things to consider before making a choice.
An ideal high-risk merchant processor for travel agents must have chargeback AI software that can track customer activity in real time and provide them with the right channels to manage their disputes quickly.
The software should also be able to notify customers when their cards have been compromised.
It is standard for high-risk payment companies to use card-not-present tools like Card Identification Verification (CID) and Address Verification (AVS) alongside anti-fraud tools like 3D Secure for the protection of their clients.
Conclusion
Remember that the best way to reduce chargebacks is to “know your customer.” A travel merchant agency that knows their customer “personally” is always in the best position to minimize chargebacks and other disputes when accepting advance payments.
As anti-fraud tools that evaluate mobile behavior and take online fingerprints become more effective in exposing criminal activity, remember fraudsters are looking for new ways to continue with their illegal activities.
This is why it is important for travel agents to engage in the services of high-risk payment processors to accept card payments. They always remain a step ahead of the game and can help insure the best payment processing solutions for your advance payments bookings.
SecureGlobalPay specializes in payment processing solutions for various high-risk business types, including travel agencies with advance payments. Our application process is seamless. If you are an existing merchant, your most recent processing statements will assist our acquirers in making a decision on approval the same day.
