This is some text inside of a div block.

Why are established industries like Travel and Tours considered High Risk

When we think of high-risk merchant processing, the industries that come to mind are typically gambling, adult content, and services, businesses based on subscriptions and start-ups that haven’t been in existence for long.

Travel and tourism are also very often considered high-risk merchants, however, partly because it’s so easy for customers to dispute credit card charges.

Reason #1: Companies Go Out of Business

Most travel purchases are made in advance of delivering the product, and this creates a substantial time window in which a chargeback can occur. Travel operators are often small companies with short histories in business. If a customer pays for a trip a year in advance and then the travel operator goes out of business, the customer files a claim and the merchant provider is required to refund the payment.

Reason #2: Disappointed Customers

When clients purchase a product or service without being able to actually “see and feel” it, there’s always a risk of disappointment when they finally receive it. There’s no way to predict a client could be affected by an airline

 strike, for example, or experience cancellation of that tour of Rome she purchased with her credit card. When this happens, she demands her money back from the operators, which incurs a chargeback on the account.

#3: The Fraud Angle

Travel options such as event tickets and tourist attractions are a popular scam for fraudsters. Tickets are bought with stolen credit cards and then resold at a discount for cash. When the cardholder discovers the fraudulent purchase, he is likely to demand a refund of the amount, resulting in a chargeback that could take weeks to resolve. Airlines already face a substantial risk of losses from chargebacks caused by “friendly” fraud.

Accepting High-Risk Merchant Processing

Some payment processors accept travel and tourism merchants in spite of being high risk. Companies that show stability through bank statements and a sound credit history have an advantage, as do travel businesses that have a risk-management policy in place. This mostly applies to companies opening their first payment processing account, because there’s no record of previous performance.

Travel operators that are switching processors are less likely to be refused an account because they can show a prior chargeback record. In some instances, processors accept high-risk merchant processing provided the merchants pay higher fees. These can be reduced later once the merchant has shown evidence of lower-than-anticipated chargeback risks.

Contributor:

John Hughes

John is currently the Senior Vice President & Head of GlobalOnePay leading business development and partner teams. John has over over 20 years experience in the electronic payments industry, with roles including co-founding a successful businesses in the financial services and merchant acquiring space. John has held senior management positions with multiple top tier acquirers and was CEO/Co-founder of Base Commerce.