Most business leaders would assume the term “high risk” would be reserved for companies that process payments with ties to illicit or potentially illegal products or services. However, those who have had to manage travel payment solutions have quickly learned that “high risk” isn’t always so risky.
In fact, the travel industry itself has been bucketed into this category, creating endless challenges for customer-facing company leaders that must manage the flow of payments across their merchant accounts. Without the right payment processing relationships, securing a travel merchant account can prove to be challenging. The friction often found in payment processing, however, doesn’t have to be the status quo. There are travel payment solutions for businesses who need a merchant account to continue scaling their business.
The dreaded “high risk” category is less than a desirable category to fall into when trying to get approved for a merchant account. For businesses that find themselves in this category, changing the way risk is assessed for your business is impossible to change — but they can influence how their travel payment solutions impact their day-to-day business operations, including the impact on their customers. We’ve broken down what your business needs to know about this complex payment processing environment and what you can do to avoid unnecessary problems.
Why Travel Companies are Labeled ‘High Risk’
The biggest reason the travel industry falls into the high risk or hard-to-place category is the timing of when they process transactions. All travel payment solutions allow business to accept payments long before the delivery of the actual product or service (bookings, travel itinerary, or flight itself), which can create complexities when plans change.
Businesses that need travel payment solutions are those that include the following:
- Travel agencies/agents
- Online travel reservation websites
- Transportation companies
- Timeshare resellers
- Airline ticket sellers
- Cruise lines
- Tour companies
Any time payments are attached to plans that can be altered — whether in the control of the merchant or not — there are significantly higher chances for chargebacks or payment disputes. Travel payment solutions become more complex as a result. Banks and lenders know these travel businesses are naturally bombarded with customers who might be dissatisfied about a travel experience that causes them to dispute payments. There is also a risk a customer forgets about a charge since these types of transactions are often processed months in advance.
Payments processed in advance can cause uneasiness with customers. Since the vacation or flight can be canceled last minute — due to sickness or weather, for example — there will always be customers who don’t agree with the payment policies established by the business. This can create excess disputes that lead to increased chargebacks, which are costly to any business’ bottom line. More chargebacks also can strain the relationships with your bank and issuing partners, making it harder to establish a reputable merchant account.
Chargebacks occur for both legitimate and illegitimate reasons. Sometimes the business didn’t deliver on their end of the deal, so a customer disputes a charge. Other times, the customer doesn’t follow through with their end of the deal and goes around the business to dispute a charge directly with their card issuer. There’s also what’s called “friendly fraud,” which is when a customer disputes a charge they didn’t realize they actually made.
Large-group payments, high amounts of transactions that run simultaneously, and big-ticket vacation packages are the reason why specialized travel payment solutions and merchant accounts were established in the industry. To properly process these transactions, businesses need to have banks that allow high-volume processing to accommodate fluctuating seasonal needs. The lack of consistency alone spurs the need for high risk merchant accounts.
How to Avoid High Risk Travel Payment Solutions Pitfalls
There are some very simple customer service policies your business can establish to avoid unnecessary disputes and chargebacks. This starts with having transparent policies that clearly define when the customer will be charged, how they will be charged, and what options the customer has to reverse or stop that charge from occurring. Payment transparency, especially in the travel industry, can go a long way in keeping your customers happy.
A satisfied customer is less likely to feel the urge to fight your business about a specific charge and go around your policies to dispute the charge with their card issuer. Once a customer issues a dispute, this creates a complex trail for businesses to travel down in order to protect their business from a chargeback. Having clearly defined refund and cancellation policies in all of your correspondence with customers is the easiest way to avoid this pitfall that often leads to unnecessary and costly chargebacks.
To successfully take advantage of your business’ travel payment solutions is to keep a customer digitally informed with all the information needed. Whenever a customer books a specific product or service with your business, communicate via email with detailed, itemized receipts and offer the ability to easily reach out to a member of your support team if they should have a question about a charge. Be specific and include all necessary details and tracking information.
What to Look for in Your Travel Payment Solutions
The first thing to look for when choosing a high risk merchant processor to manage your travel payment solutions is who has the right tools to manage your merchant account. This includes features such as robust, chargeback mitigation software, the ability to track customer activity in real-time, tools that allow transactions to be cleared in a timely manner, and proper channels for them to manage disputes. The right travel payment solution provider will represent your needs should disputes arise with your merchant account. Also, ensure you find a partner that offers fair, transparent rates. Expect them to offer the same types of service and deals that you’d offer your own customers.
Since travel businesses often fluctuate how much they’re processing each month due to seasonal needs, you’ll want to look for a travel payment solution that offers unlimited processing volumes. This allows your business to account for high-volume months without overpaying during your slow season. What keeps your business up and running is the ability to process payments without unnecessary delays. For established businesses, the right travel payment solution provider will help your business avoid the hassle of rolling reserves so you can keep 100% of the volume you process.
Although the term “high risk” often has a negative business connotation, when managing your travel payment solutions, this doesn’t have to be the case. Traditional credit card processors and banks may not be keen to your type of business, but there are companies — like SMB Global — that pride themselves on helping businesses of all shapes and sizes. Known specifically for high-risk merchant processing and payment gateway needs, travel businesses can take advantage of features like our chargeback prevention platform that monitors your merchant account in real-time to help you win back lost revenue.
Being high risk doesn’t have to leave your business outside the mainstream payment processing fold. The right payment processing partner will be able to serve your travel payment solution needs in a way that helps you manage your payments better — while keeping your merchant account functioning at the level needed in today’s evolving business ecosystem. Your customers don’t always fit into a traditional mold and neither should your travel payment solutions.
Anna Kragie is a content contributor for SMB Global. She previously wrote for PYMNTS.com, as a Sr. Content Producer, where she focused on financial services and payments innovation, fraud and security, emerging payments, and FinTech news, research and thought-leadership content across the payments industry.
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