As a travel provider, dealing with chargebacks is inevitable. A customer disputes a payment, their bank reverses it, and suddenly you're out of pocket and saddled with a higher chargeback ratio. They are a serious threat to profitability and, at high enough volumes, the viability of your merchant account.
The travel industry is vulnerable to chargebacks for a few reasons: high-value transactions, long lead times between booking and travel, and confusion around cancellation policies create the ideal environment for disputes. This is reflected in the data. Travel is one of the industries with the highest chargeback rates, and Mastercard found that travel and hospitality have the highest average chargeback value at $120.
But you don't just have to accept a high chargeback ratio, and we've put together five tips to help travel businesses reduce chargebacks.
Why Travel Businesses are Vulnerable to Chargebacks
The main issue is the gap between customer payments and service fulfillment. When a customer pays months before they travel, it creates a window of opportunity for buyer's remorse and changing circumstances that lead customers to initiate a chargeback.
Friendly fraud is the biggest culprit, accounting for 60 to 80% of all chargebacks. Perhaps a traveler can't make the trip they booked, but they're outside the refund window, so they file a chargeback as a workaround. Cases like this are frustrating because you did everything right—the challenge is proving that the customer is in the wrong.
The chargeback timeline compounds the problem. Depending on the card network and issuing bank, customers typically have between 60 and 120 days after a transaction is made to file a dispute.
How Chargebacks Impact Your Travel Business
The impact of a chargeback goes well beyond the loss of the original payment. Here's a breakdown of what each chargeback dispute costs you:
- The full value of the booking
- The chargeback fee charged by the acquiring bank to the merchant is usually between £15 and £25
- If you're put into a card network's monitoring program, such as Visa's VAMP, you may be charged fines and fees until your chargeback ratios fall below the card scheme's threshold
- The administrative costs of attempting to reverse a chargeback, as the process requires time and team effort
- Every booking that results in a chargeback is a lost opportunity that could've been given to another customer
For a single booking, these costs can easily double or even triple the direct revenue loss. For a business processing hundreds of transactions a month, even a modest chargeback rate can translate into thousands lost every month.
5 Tips for Reducing Chargebacks
So what steps can you take to reduce your chargeback ratio? Here are our five top tips:
1. Keep an Eye Out for Warning Signs
Many fraudulent or high-risk bookings show you clear warning signs if you look closely enough—you just have to know what to look for. Keep an eye out for these red flags:
- Repeated card declines, followed by multiple card attempts for a single booking
- Unusual spending patterns, such as geographically inconsistent purchases
- Frequent booking changes
- Unclear communication
- Last-minute, high-value bookings
- Mismatched names between the cardholder and the traveler named in the booking
- Multiple bookings using different cards in quick succession from the same person
If you spot these signs, ask the traveler for additional verification to confirm their identity, including a copy of their ID or a call to the number you have on file for them. This does add friction, but it's much less painful than losing a booking to fraud and then spending hours fighting a chargeback.
2. Keep Detailed Records as Evidence
When it comes to chargebacks, evidence is everything. It's the difference between winning and losing a dispute, and you need to be able to produce evidence quickly. Make it standard practice to retain the following information for every booking:
Booking and Payment Documentation
- Itinerary details
- Price breakdown
- Accepted terms and conditions and cancellation policy
- Card verification responses
Communication with Customers
- All email conversations from initial inquiry to post-trip communications
- Chat logs from your website and/or messaging platforms (e.g., WhatsApp)
- Phone call recordings (only if the customer knows they were being recorded)
- Support ticket history
Proof of Service Delivery
- Booking confirmation sent to the customer
- Check-in records and confirmation
- Customer feedback and surveys
To make your life easier, make sure the information is easily accessible. It'll save you and your team time when disputes arise, allowing you to respond faster. It's important to note that every card network has its own dispute timeframes, but deadlines typically sit between 20 and 45 days after the merchant is notified.
3. Use Clear Billing Descriptors
A common reason for chargebacks is that customers don't recognize the charge on their bank statement. Fearing that their money has been stolen, they dispute the transaction with their bank. If your company trades under a different name from its registered legal entity or if the descriptor is a string of characters, you're accidentally increasing the risk of chargebacks. Make sure the billing descriptor matches the brand name your customers know.
4. Communicate Clearly and Proactively
Some chargebacks aren't the result of fraud at all, but unclear communication. If customers feel confused, frustrated, or as though they didn't receive what they were promised, they may initiate a chargeback. Clear and proactive communication is one of the most effective (and the least expensive) prevention tools available to you. Communication with customers should be structured around three stages:
At the Time of the Booking
- Promptly send a booking confirmation email containing all the relevant details
- Document customer acceptance of your terms and conditions (e.g., a checkbox during the checkout process)
- Provide a clear, detailed itinerary so the customer knows exactly what to expect
- Explain how the booking will appear on their bank statement, as this will prevent the "I don't recognize this charge" chargebacks
- Make sure your cancellation and refund policies are as clear as possible, not buried in the fine print where customers rarely look
Pre-Travel
- Send a reminder notification as the travel date approaches
- Confirm final arrangements, including any last-minute details, to remind the customer of what they should expect
- Provide emergency contact information in case something goes wrong
- Communicate changes to the booking as soon as possible and in writing
Post-Travel
- Request feedback as soon as possible—if something went wrong for the traveler, you want to know about it before a customer considers initiating a chargeback with their bank
- Address any issues quickly and document all responses between you and the customer
- Keep records of all post-trip interactions, regardless of the communication medium
The last point holds particular weight. A customer who contacts you with an issue wants a fast, empathetic response and is far less likely to initiate a chargeback if they feel you're taking the issue seriously. Many disputes occur because customers feel ignored.
5. Modernize Your Financial Operations
Manual processes are a breeding ground for errors. Automating your payment operations significantly reduces the chances of human error at every stage of the payment process. Here's where automation can make the biggest difference:
Payment Processing
Use a payment platform that automatically applies the correct charges, sends receipts and flags anomalies that your staff might not spot. Try to avoid situations where staff manually enter amounts or process refunds without system-level checks.
Record Keeping
Automate the capture and storage of transaction data, authentication results and customer communications. Relying on staff to manually store data somewhere accessible isn't enough—inboxes quickly overflow, priorities change and adherence to processes falls by the wayside.
Chargeback Monitoring
Many payment processors offer tools that offer visibility into chargebacks. Setting up monitoring so you're not unpleasantly surprised by a high chargeback ratio will save you a lot of time and money.
Staff Training
Technology undoubtedly does a lot of the heavy lifting, but it isn't everything. Regular fraud awareness, payment handling and dispute response training will keep your team aligned on best practices.
The Bottom Line: Reducing Chargebacks as a Travel Business
To some extent, chargebacks are a cost of operating in the travel industry. However, to stop them spiraling out of control, you need to keep on top of them. By looking for early warning signs, keeping detailed records, using secure payment methods, communicating proactively and clearly with customers and modernizing your recordkeeping and payment processing, you can significantly reduce how many chargebacks you receive.
Reduce Chargebacks with Repayd
By combining chargeback management with insolvency protection, Repayd safeguards your revenue, protects your customers and keeps your merchant accounts in good standing. Our solutions support:
- Chargeback management for qualifying transactions
- Ongoing monitoring of account risk ratios
- Early alerts on potential account exposure
- Segregated structures for customer funds
- Protection against supplier or operator failure
Our systems give you much-needed visibility into your dispute levels, helping you reduce your chargeback ratio and stay compliant with acquirer requirements. To reduce the financial and operational impact of chargebacks on your travel business, please get in touch with the friendly Repayd team today.
