Travel and tourism is a thriving industry in America, but businesses in this industry still qualify as high-risk. According to data from credit card processors, customers are statistically more likely to dispute and request chargebacks from travel agents and agencies.
According to the Washington Post, chargebacks are a last-ditch effort by customers to get a refund from their car rental service provider, airline, or hotel. Chargebacks of this nature are on the rise and customers find it easier to get refunds from this method. The Federal Reserve Bank of Kansas City concurs. In a recent working paper, the Fed pointed out that not only was this issue of chargebacks rampant in the travel industry, it was also a lot more expensive for businesses. The average chargeback for a travel service provider was $18, compared to just $8 for the second riskiest business on the list.
If you operate a hotel, car-rental service, travel agency, tour operator, or bed & breakfast in a thriving holiday destination, here’s what you can do to stem the losses from chargebacks and reduce the inherent risk in your business:
Study Travel Merchant AccountsBusinesses are termed ‘high risk’ due to the rate at which customers deploy chargebacks. This means that businesses within such an industry have to face losses in revenue and lack of support from their credit card or payment processor.
A travel merchant account is an account specifically designed for high-risk industries like travel. A travel merchant account offers these companies a range of potential benefits, including fast processing speeds, better rates on transactions, industry-grade online and offline security features, easy accessibility, and round-the-clock professional support. Some of these travel merchant account providers even offer an API so your development team can neatly integrate payment processing into your web portal.
Travel merchant accounts are available for businesses with the appropriate travel-related NIACS and SIC codes. You should also take the time to analyze your personal credit, business transaction history, risk mitigation strategies, monthly transactions volumes, and chargeback history before picking a travel merchant account provider that suits you.
Applying for a Travel Merchant AccountBe strategic when applying for a travel merchant account. Chose a payment processor that has relationships with different banks. In this way, you can efficiently apply for multiple merchant accounts, while carefully controlling where the applications are being sent.
Be sure to know which banks your applications are being sent to. Many unscrupulous payment processing companies will send your application everywhere to see what “sticks”, with little understanding of which banks are apporpirate for your business. Then you end up with declined applications. And unnecessary checks to your credit. Which negatively affect your chances for approval.
Here’s how to apply for a travel merchant account:
Step 1. Do your homework. Select a payment processing company that represents many different banks. Call the company. Do you like the way you are treated? Does the company understand what you need? Do they have a plan for you? After talking to 3-5 companies, chose 1-2 to work with.
Step 2. Submit an application & supporting documents. You will be asked for processing history, corporate documents, and identification for the signer on the account history. During the underwriting procedure, you may be asked for additional info. Supply this quickly and completely. Keep track of the banks to which your application will be submitted. Avoid applying to the same bank through different companies, which actually decreases your chance for approval.
Step 3. Account(s) approval. Many high-volume travel merchants obtain more than one payment processing account and load balance them on a single payment gateway, simplifying management.
Step 4. Begin processing. Accept orders online with an easy integration to your website. Virtual terminals for MOTO orders are included with all accounts.
After your accounts are approved, management them properly. If chargebacks are an issue, add chargeback prevention & mitigation services to keep protect your accounts. Provide superior customer service and do the best you can to keep your customers happy.
Grow your merchant accounts steadily. If you need more volume, let the processor know the reason. Increases your processing capacity can be quickly accommodated.
The travel industry is thriving. However, businesses in this industry have to face the dual risk of chargebacks and fraud with limited support from traditional banks and credit card providers. Financial institutions are reluctant to provide payment processing to companies they deem ‘high risk’ based on estimated rates of chargebacks and fraud within an industry.
Travel service providers are increasingly turning to special merchant accounts that help them mitigate this risk, lower transaction costs, and preserve profits. These payment providers offer quick approvals, high security, and faster processing.
Do you offer travel-related services? Are you a car-rental, hospitality, or timeshare business?
Speak to our advisor today and find out how a travel merchant account can help you.