Travel is a big part of our everyday lives. With millions of people traveling for business or pleasure from every corner of the globe, major opportunities still exist in this business sector. Accepting all payment methods via multiple travel industry merchant accounts is crucial for success.
As a highly demanded service, the travel sector keeps on growing because people are willing to spend more money than ever before.
And with credit cards as a popular means of payment, people find it easier and more convenient to pay for their travels.
Taking vacations, going on excursions and traveling to exotic places offer plenty of opportunities for financial institutions that can tailor their services to the industry.
Unfortunately, the industry is considered high risk mostly due to chargebacks and fraud. Chargebacks and disputes mainly associated with credit card payments are the primary reason merchant processors do not easily approve these types of merchant accounts.
And because of this development, many financial institutions choose not to offer their services to travel businesses.
However, there is no way around this if a business in this industry wants to succeed. All travel merchants must find a way to accept credit card payments or they risk losing revenue and customers.
Travel industry merchant accounts solve this problem. These unique merchant accounts effectively process card payments from travel customers, irrespective of the risks involved.
Businesses that Need Travel Industry Merchant Services
High-risk businesses that need travel industry merchant accounts include:
- Independent travel agents
- Travel agencies
- Online travel agencies (OTAs)
- Online travel reservation websites
- Tour operators
- Ticket sales
- Tourism services
- Cruise lines
The travel industry is highly profitable. However, without a high-risk merchant account to accept payments, it will be difficult for any business to thrive.
If payment processors and acquiring banks want to remain in business for the long haul, they need to offer travel industry merchant accounts as means of collecting payments to their customers.
Challenges of Card Payments in High Risk Businesses
The travel industry is not the only business considered high-risk by banks and financial institutions.
Other high risk businesses like forex, gaming, gambling, CBD and online pharmacies also make the list.
A lot of effort goes into making a traveling experience a memorable one. Flights, hotel bookings, travel packages, cruises, car rentals and restaurant reservations are just some things that need to be considered.
These trips cost lots of money and need to be booked months ahead of schedule. Unfortunately, there is always the likelihood that something will crop up and make people cancel their trips.
Even with all the efforts put towards planning and making different reservations, customers can easily file chargeback claims on their cards.
And every time this happens, the travel merchant and issuing card company lose money on the transaction.
Fraud is also a big issue in the travel sector, since a lot of payments are made with credit cards. According to a report, this problem costs travel companies around $10 Billion per year.
The high volume of transactions in the travel industry is another worry for financial institutions.
Travel merchants hardly confirm transactions they make on behalf of clients with card companies.
An agent could book a flight and discover hours later that it did not go through because a credit card company thought it was a fraudulent transaction.
These types of incidents underline why financial institutions are not keen on working with international travel companies.
Benefits of Having a Travel Industry Payment Processor
Travel businesses need high-risk merchant accounts to work around problems associated with the industry.
Here are some benefits of owning a travel industry merchant account.
With a high-risk merchant account, the provider is fully aware of the problems at hand and has preventive measures already in place.
Security precautions are far more advanced with travel industry merchant accounts because they easily detect misleading transactions. This is the reason why high-risk accounts take a bit longer to process card payments.
Owning a travel merchant account also allows you to run an online business and accept different currencies via a payment gateway.
An online business cancels a lot of overheads and lets you scale up business profits easily.
Before Applying for a Travel Industry Merchant Account
Opening an account with a payment processor that understands the risks involved in the travel industry is not easy.
Most high-risk account processing companies have a scoring system that they use to determine if a merchant meets the necessary requirements.
The scoring system usually favours travel agencies that have been in business for some time.
When underwriters evaluate high-risk businesses, they look out for companies that have savings and healthy credit histories.
These observations allow travel merchants to be accepted without having to worry about account restrictions.
Less established travel merchants are not approved so quickly. Moreover, they are usually charged higher fees and have limitations on the amount of business they can do.
This is why some merchants feel the easier route is to sign up for flat-rate processors like PayPal, Stripe or Square.
Do not take this route because these third-party card processors do not deal with high-risk businesses too.
It is easy to open accounts with these companies because their requirements are not too strict. However, a few chargebacks can raise red flags and have your account terminated with immediate effect.
This termination shows up in your financial documents and prevents you from opening any travel industry merchant account in future.
Choosing the Right Travel Merchant Account Provider
The first step towards finding the ideal merchant account provider for your high-risk travel business is to research.
Industry associations like the American Society of Travel Advisors is a perfect place to start.
When it comes to choosing the right provider, make sure you settle for a company with expertise and experience working with travel agents.
Pricey rates are to be expected with high risk merchant accounts. But when you show a track record of minimal risks and steady growth, these rates could drop.
Before deciding on which provider to choose, always ask how long it takes for rates to drop when using travel industry merchant accounts.
Any high-risk merchant account application process begins with putting your financial records in order.
You need to show a series of successful transactions over the last 6 months with minimal chargebacks for an approval.
Your bank balance must also show steady growth. What you earn should be consistent and have no traces of illegal activity.
Do not lie on your travel industry merchant account application. If found out, your application will be canceled.
As a new company, provide as much information as you can to help with your application. Take time to show the steps you have taken to minimize the risks of your travel business.
Merchant service companies always want to see your refund and deposit policies, the security measures you have put in place and the transaction volume you are targeting.
If you have been in business for some time, this might be all that is required.
However, if you are just starting out, you should be ready to do a lot more to show that you are a low-risk client.
Be prepared to answer lots of questions when you submit a travel industry merchant account application. Some of the more important documents you need to provide will be your most recent bank statements and credit card processing statements.