Reducing chargeback risk in the travel industry

Annie Galvin
Annie Galvin
is Client Success Manager at Flywire

As businesses in all sectors focus on preserving capital and reducing risk, few are facing as many challenges as those in the travel industry. One such challenge is preventing credit card chargebacks.

When a customer requests a refund from their card issuer rather than directly from the merchant, the credit card company will reverse the initial payment in what is called a chargeback. Chargebacks create a headache for travel businesses, negatively impact cash flow, and are a significant barrier to the ultimate goal of rebooked reservations.

Chargebacks most often fall into one of three categories:

  • Fraud - Even legitimate vendors can be hit with this as a reason for a chargeback if the customer does not recognize the merchant of record on their statement and associate it with their legitimate purchase.
  • Transaction Not Recognized - This can be seen if the customer recognizes the merchant, but does not believe the particular charge is a legitimate one.
  • Service Not Delivered - This has been the most common chargeback reason in this time of travel restrictions due to COVID-19. This is often used when the payer is charged but the service is not received, as may be the case if trips are cancelled due to travel bans.

Dealing with chargebacks is frustrating and creates various difficulties for travel businesses. So how can you reduce your chargeback risk? Here are five best practices to follow:

1. Make your policies clear

Now’s a good time to review your terms and conditions and make sure they explicitly lay out your cancellation and refund policy. Consider updated terms for the 2020-2021 season to account for any possible disruptions due to COVID-19. Having strong terms and conditions can help you fight a chargeback dispute and, if you’re a Flywire client, can help us win chargebacks on your behalf.

2. Encourage payment via bank transfer

If your guest pays via bank transfer, you won’t have to worry about chargebacks at all. Additionally, bank transfers often have lower associated costs than credit card transactions. Providing your clients with the option to pay via a local bank transfer can create a better experience for both sides. Flywire can facilitate this by providing user-friendly bank transfer options that will save you and your guests time and money.

3. Provide a receipt or summary of services

Provide your guests with a detailed receipt or summary of services that includes the refund and cancellation policy. Such documentation is helpful when fighting a chargeback claim, or when Flywire is fighting one on your behalf.

You may also want to consider billing services provided prior to a guest visit separately. This can work well for any planning or preparation services that you provide that creates sunk costs for you, whether or not the trip ultimately takes place.

4. Mandate travel insurance

Some in the travel industry are considering mandating insurance for any trips taking place for the next 12-18 months. Given uncertain global conditions in the near future, this can give peace of mind to your guests, and potentially save you from a chargeback. If a traveler’s cancellation is covered by insurance, they won’t need to consider making a claim with their credit card company.

5. Let your guests know what to expect on their statement

Your credit card charges may appear on a guest’s statement as a name that is seemingly easy to recognize. Or it may appear as a third party’s name, like Flywire. Either way, letting your guests know exactly what to expect when they see the charge on their statement will help prevent any erroneous fraud claims.

Using this time to reevaluate your policies and procedures, as well as your payment options, can help you not only survive the downturn, but actually emerge stronger. Flywire is offering free payments assessments to travel businesses coping with the challenges of the current climate. To request your assessment, click here and we’ll explore ways you can minimize chargeback risk, save money, and create better experiences for your guests.

Free travel payments assessment