A tour operator merchant account is a specialized account that allows tour companies to accept and process payments.
The global tour operator market is now worth over $68.7 billion, and there's more money to be made. To capitalize on this market, however, the right tools are essential. Choosing the right payment processing solution for tour operators is the key to converting customer interest into confirmed bookings.
In this article, we'll explore must-have features for merchant accounts for tour operators and share tips on how to choose the best provider for your business.
Why are Tour Operators Considered High-Risk?
It's no secret that travel companies are considered ‘high-risk’. This classification is why specialized high-risk merchant accounts for travel are the right choice for many tour operators.
There are several reasons why the sector is viewed as particularly high risk:
Long lead times
Many travelers book tours many months in advance. This period between the customer making the payment and the service being delivered increases the window for cancellations, refunds and chargebacks – all of which eat into your bottom line.
Chargebacks
The travel industry faces a growing chargeback problem. The average chargeback rate in the travel industry is between 0.89% and 1.10% – one of the highest across all sectors.
But the cost of chargebacks isn't just the chargeback amount. It's also the cost of managing disputes, fees and penalties. These hidden costs mean the actual cost of chargebacks can be as much as 2.5 times the original transaction value.
High transaction values
The cost of a multi-day tour package is considerably more than a typical eCommerce purchase, meaning each transaction carries a greater financial risk for your tour company and the acquiring bank.
Complex international transactions
Offering your tour services to travelers worldwide means navigating the complexity of cross-border payments, which adds another layer of risk to payments.
Merchant Accounts for Tour Operators: Features to Look Out For
A generic merchant account isn't enough for tour operators. Here are some of the features to look out for when choosing a specialized tour operator merchant account provider:
Multi-currency and global payment processing
Travel has a notoriously high cart abandonment rate. There are several reasons for this, one of them being that travelers prefer to pay in their local currency. Allowing travelers to pay in their preferred currency is one of the most effective ways to reduce cart abandonment.
Repayd offers multi-currency payment processing for tour operators, opening the door for you to accept payments in various currencies and build trust through secure and reliable transactions.
A diverse range of payment methods
Another way to reduce your tour company's cart abandonment rate is to offer a diverse range of payment methods. While credit card processing for tour operators is the bare minimum, relying on traditional payment methods, such as cards, leads to high cart abandonment rates.
To meet traveler expectations, you should also offer more modern payment methods, such as digital wallets (Apple Pay, Google Pay, etc.) and Buy Now, Pay Later (BNPL) services. Demand for these payment types is booming, with digital wallets accounting for 55% of online transactions in Europe, and 1 in 10 people preferring to use BNPL for travel purchases.
Repayd lets your customers pay in the way that works best for them, including but not limited to:
- Credit and debit cards
- Alternative payment methods (Alipay, Sofort, Giropay and more)
- Bank transfers
Offering a wide range of payment methods shows your customers that you understand and cater to their needs, which helps build trust.
Fraud and chargeback prevention
Fraud is a growing threat to the travel sector, and it is becoming increasingly sophisticated. Credit card fraud, data breaches and booking fraud are constant concerns for companies of all sizes, with 53% stating that online fraud costs them around $10 million a year.
So, what can tour operators do to protect themselves and their customers?
Fraud detection tools
Invest in fraud detection tools to analyze booking patterns and flag potentially fraudulent transactions. Standard fraud detection methods include:
- Transaction monitoring
- User profiling
- Risk rules
- Risk scoring
These tools may also use machine learning to identify patterns in thousands of signals, helping to defend against a wide range of sophisticated fraud methods.
3D Secure 2 (3DS2)
3DS2 is an authentication protocol that adds a layer of security to online card payments – a common fraud target. It works by verifying the cardholder's identity with their bank when they make a purchase.
3DS2 requires at least two forms of authentication through something the customer knows (OTP, PIN or password)
- Something the customer owns (credit card or mobile device)
- Something the customer is (fingerprint scan or voice recognition)
The authentication protocol provides more robust fraud protection, enhances the payment experience and improves chargeback management for merchants.
Chargeback management
Unfortunately, chargebacks are on the rise, with 71% of travel companies confirming that they've experienced a growth in chargebacks in recent years. Having chargeback experts on hand to help you deal with any that come your way will make a big difference to your bottom line.
When you join Repayd, you receive chargeback support from our experienced fraud specialists on top of your tour operator merchant account, financial failure insurance and supplier payments capabilities. It's the ultimate package for growth-minded tour operators.
Easy booking software integration
You want a merchant account for tour operators that streamlines your operations. That's why Repayd integrates directly with your existing booking system, allowing you to:
- Create and view bookings
- Keep track of all transactions
- View your statements
- Know when your next payout will be (and how much you will be receiving)
- Review your ledger to check that payouts have been processed
On top of that, Repayd's analytics capabilities allow you to analyze all transactions to see exactly where in the world your customers are coming from.
How to Choose the Right Tour Operator Merchant Account
Choosing the most suitable tour operator merchant account for you takes time – it's not something to rush into. Here are a few considerations to keep in mind when it comes to selecting a provider:
Research and compare tour operator merchant account providers
The first step in selecting the best merchant account for your tour business is to build a shortlist of providers with proven travel sector experience.
Ask each provider on your shortlist for detailed information on their rates as well as the core features they offer, such as fraud tools, chargeback support, the payment types included and what settlement speed you can expect.
Before signing a contract, be sure to review merchant agreements and reserved policies. Clarify the terms on the reserve account, which is the percentage of your funds the provider holds back to cover potential chargebacks.
Also, be sure to look for any processing caps and the associated fees for exceeding them, as you need to make sure you're choosing a provider that can handle the volume of transations your tour company is likely to receive.
Industry specialization
There are plenty of standard high-risk merchant accounts out there. You could use one of these solutions, but they don't understand the realities of being a tour operator because they're not focused on the travel sector.
Providers of merchant accounts for tour operators genuinely understand your needs and provide services to support your travel business as it fluctuates throughout the year.
Transparent pricing
No one likes hidden fees. That's why it's essential to partner with a tour operator merchant account provider that's upfront with its pricing. You may find much of the information you need on the provider's website, but it's essential to ask for a detailed rate sheet regardless. That way, you won’t get any nasty surprises when it comes to paying for the service.
Robust security measures
Verify the security measures the provider has in place to protect you and your own customers. A good place to start is to ask these questions:
- Is the provider PCI DSS compliant?
- Do they offer advanced fraud detection and prevention tools?
- How about 3D Secure 2?
- Do they use CAPTCHA on their website to defend against malicious bots?
If you're unsure about the answers to any of these questions, ask the tour operator merchant account provider directly. They'll be able to provide you with all the information you need about how they protect your customers' data.
With Repayd, you get all of the features above in one easy-to-manage platform. We're the leading tour operator merchant account solution for the international travel industry, and our mission is to make payments simple, secure and reliable, as they should be.
We combine seamless cross-border payment processing with built-in financial protection – covering chargeback prevention, insolvency cover and risk mitigation through diversified acquiring.
Repayd's travel merchant account solution is secure, reliable and built to simplify payments for tour operators. Contact us today to discover how we can simplify and reduce the cost of delivering unforgettable tour experiences.
