Comprehensive Guide to Chargeback Management in Travel Industry: Strategies and Tips

More often than not, the travel industry faces the negativity of chargebacks. Starting from true fraud cases to intentional frauds (also known as friendly fraud), this industry is one of the preys. The result? Chargebacks. Chargeback is the most popular route for travelers because the travel industry is time-bound and expensive.

But it doesn’t have to be that way. You can save your travel business from doom if you wish, with the tie-breaker framework to manage and deal with chargebacks. This article discloses all the details to you - the reasons for chargebacks in the travel industry, how to deal with them, and, most importantly, the strategies to prevent them.

Before that, let’s go through the basics. A chargeback is a request for reversal of a transaction initiated by customers. This process is facilitated by a third party, which is why it is complex, time-consuming, and comes with additional charges. Any and every transaction done with a card is eligible for chargebacks. 

Why do chargebacks happen in travel?

The first step to finding a chargeback management system that works is to find the root cause. You must know why chargebacks happen so you are aware of the right steps and processes to deal with them and win your revenue back. Let’s go through some of the common instances when chargebacks occur:

1. Fraud

Travel and tourism are frequently hit by fraud attempts, where fraudsters may take over accounts to transfer mileage points, or make bulk trades and cancellations to test stolen cards. All such instances are true frauds that customers chargeback.

There is also a fair share of friendly fraud facing the travel industry. Some customers just want to enjoy the benefits and perks of travel bookings without actually traveling. Others may try to chargeback a nonrefundable ticket they failed to avail of or they just want to travel without paying a dime. While remaining customers are outright clueless about the terms and conditions of their purchase.

Either of these situations is a revenue loss for you. Hence, you need to build a management system around it. 

2. Agent

Agents occupy a massive space in the travel industry, often a bridge-like place that connects the best travel arrangements to individuals. They make transactions on behalf of the customers and in bulk. So, they also create a disconnect between either of the parties and cause confusion. 

An agent’s misinterpretation, half-baked information, misleading bookings, and more might lead to a chargeback. All such communication gaps are difficult to deal with because the transactions did not directly happen between the customers and travel businesses. 

Such small travel agencies do not have strong security control but make hefty transactions. They are an easy target for fraudsters. 

3. Dissatisfaction

Any grudges with services and products received are chargebacked. This includes customers who are not satisfied with the kind of services provided, face poor service, or have unmet services/products they paid for.

4. Expectations

What customers expect from a travel arrangement might not always fit right. For example, what customers expected would be an ultra-luxury stay might turn out to be a decent stay above par, and what customers expected came with amenities and travel arrangements did not actually come through. All such gaps between what customers expected to receive and what they actually got can be chargebacked.

5. Errors 

Errors are common for travel businesses too and include, but are not limited to, billing, double charges, and glitches. All such errors come with a high possibility of chargebacks. 

Also, customers who have issues with a refund on cancellation or other similar issues also opt for the chargeback route. They often chargeback for services they never received, suddenly canceled flights or bookings, etc. 

What is the chargeback process in the travel industry?

The process gives businesses a chance to fight illegitimate chargeback requests. But only those businesses that do it right have a shot at winning. There are multiple factors at play that will help you win a case, and you need to follow them all. Here’s how the process goes:

1. Initiation

The first step in the process kicks off when a customer files a chargeback request. A chargeback request is generally filed with either the issuing bank or the card issuer. The customer follows the process prescribed and provides a reason for chargeback.

2. Reversal

Right when the issuing bank or card issuer receives the chargeback request, they investigate the request. If found legit based on the submission and details provided, the concerned party makes a temporary reversal of the transaction. You lose the transaction money here until the chargeback process is complete, and forever if you lose the case.

3. Notification

You are notified about the chargeback request with the reversal of the transaction. This happens as soon as the reversal happens, and the issuing bank or card issuer also provides a reason code with the notification that you must respond to. The reason code is an alphanumeric combination that explains the reason why the chargeback request was raised.

You must immediately send in your response, either by accepting the chargeback or fighting against it. The inability to provide an immediate response leads to automatic acceptance.

4. Response

If you accept the request, you lose the case. If you choose to fight it, you need to build a compelling case with evidence. So, you must draft a rebuttal letter explaining why the request is invalid (the shorter, the better) and attach evidence like relevant documentation, including receipts, service agreements, and communication with the customer.

Make sure you create the letter and attach the evidence in the format accepted by the concerned issuing bank or card issuer. Any mismatch in the format or lack of clarity leads to the rejection of the case. Remember, you only have one shot at success.

5. Resolution 

Based on your response, the bank/issuer will make the final call. If you win, you will get your business back, leading to the reversal of the early temporary debit done in step 2. Otherwise, you lose the case, and the temporary debit is made permanent. 

Can you prevent chargebacks in travel industry?

You do not just lose your transaction money with chargebacks; you also have to bear additional charges. Issuing banks or card issuers levy certain charges on you to process the chargebacks which may not be recovered. Plus, dealing with and fighting chargebacks requires a lot of manpower. Overall, chargebacks can be a major blow to your business. 

Worry not, because you can avoid them all if you can successfully prevent chargebacks. You need a strategy to stop chargebacks from occurring in the first place. Here’s where to get started with it:

1. Defined communication

Ensure there are no gaps in communications around your company’s terms and conditions, irrespective of who books for your service/product. Also, ensure all these documents are easily accessible to the public. Better yet, proactively communicate all the details throughout the booking process so everyone is informed.

2. Enhanced accuracy

Keep your booking systems in check at all times. Ensure there are no inconsistencies in bookings and billings, and everything is accurate and to the mark. You should try your best to avoid mistakes, faulty systems, and flawed processes to ensure you leave no change for a chargeback.

3. Prompt delivery

Ensure the quality and timeliness of what was promised are delivered. Make sure you do not overpromise and underdeliver. Promise only what you have to offer to set expectations and keep them all on record. These records also serve as evidence in case the customer does raise a chargeback request.

4. Improved security

One of the ways to fight fraud is through improved security. Upgrade your security system and measures to include robust fraud prevention measures, such as secure payment gateways and customer verification processes.

5. Supportive customer service

Offer multiple communication lines for your customers to connect with you. Leaving many lines open gives you a better chance to serve your customers queries and gives them a chance to clarify doubts with you first before going for a chargeback. Encourage your customers to reach out to you first by offering a reward or refund. 

6. Upgraded operations

Use automation tools to make the process easy, and analytics to learn from previous mistakes. Keep a record of all the previous transactions and chargeback requests, no matter how tiny or huge they are. Study them all to find any recurring patterns that you must rectify, or success patterns that you can expound upon. 

Conclusion 

The chargeback management process is difficult, but not impossible. It is a lot of work initially, but when you build the right process, you can master it. Because chargebacks have a direct impact on your bottom line, they have to be your priority.

You do not have to do it all yourself, though. If you need help, ChargePay is at your disposal. We are ChargePay, an AI chargeback management tool that harnesses the power of AI and ML to effortlessly resolve customer travel disputes and reclaim lost chargebacks within the intricate web of travel systems.

Get started with ChargePay.

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