Why Travel Merchant Accounts are Considered High Risk.

Despite these challenges, travel agencies can still secure merchant accounts by demonstrating their financial stability, implementing strong fraud prevention measures, and providing excellent customer service to minimize chargebacks. National Transaction Corporation deals with thousands of travel agencies and can assist in approvals where others face declines.

Although the main reason for travel merchant accounts being categorized as "high risk" is the "delayed delivery", sometimes known as "future delivery". There are several factors that also come into play like chargebacks, cancelations and refunds large volume and large ticket prices, just to name a few. Many merchant service providers take issue with the size of a travel agents total ticket price and the fact that cardholders are booking today for travel that might be months away which opens a window for chargebacks to occur (delayed/future deliver). Imagine a travel travel agent that takes 10 bookings at $1000 each for a trip that is 3 months out. There is a potential for up to $10,000 in chargebacks to occur if the travelers are not happy with all or a portion of the trip they are booking. Then consider the agent continues taking more booking for trips that continue to be 3 months (or more) away. The additional bookings further compound the amount extended to travel agencies as a "loan" until the traveler returns and their chargeback window closes, typically about 6 months more. So the travel agency gets paid today for risk on multiple trips that are to occur in the future.

The travel industry is susceptible to external factors like economic downturns, natural disasters, political instability, and pandemics. These events can lead to mass cancellations and a surge in chargebacks, leaving the merchant account provider exposed to significant losses.

High Chargeback Rates and Large Tickets

Some travelers tend to chargeback their trips rather than reaching out to travel agents for a refund, so when outside factors affect their ability to travel, they tend to perform a chargeback rather than a refund adding further risk to the merchant account. Consider that a single trip might include flights, cruises, vacation packages, hotel stays, tour operator pakages and car rentals, the price per booking mounts up fast and remember, all that is to occur in the future in an industry prone to chargebacks.

Fluctuations in Seasonal Volumes

Travel merchant accounts see a fluctuation in volume unlike other industries. Many people tend to travel in the summer or winter months creating processing volumes higher in some months and lower in others. Sometimes the lower volume months can be as low as zero which means the travel agent needs to keep their merchant account and payment infrastructures open for business even in the months where no or little transactions are performed.

International Credit Card Processing & Cross Border Fees

The main frustration for travel agents performing international credit card transactions are volatile exchange rates between the paying cardholders country of origin and the travel agents merchant account country of origin. The values of currencies can fluctuate widely and very quickly eating into the profits of the travel agency impacting their profitability.

There are also varying regulations from one country to the next that can make international payment processing a unique challenge when it comes to business compliance. Sometimes bookings in one currency can change when travel agencies pay their suppliers in a different currency presenting hurdles and time consuming issues for their business infrastructure. There are various ways to deal with exchange rates and currency conversion to mitigate these challenges. Demonstrating the processes used to deal with currency conversion can lower the high risk profile of the travel agency when opening the merchant account.

Security, Compliance and Fraudulent charges

PCI/DSS compliance is very important for travel merchant accounts. Preventing fraud and data breaches is paramount to a travel agency's reputation. These requirements can become costly and time consuming especially for a small travel agents merchant account. The travel industry holds sensitive customer data, making it a target for data breaches. Protecting this data is crucial to maintain customer trust and avoid financial losses. Implementing effective fraud prevention measures is essential to minimize chargebacks and protect the business from financial losses.

Integration Challenges

Travel agencies often use multiple platforms for bookings, flights, hotels, and other services, making it challenging to manage payments across different systems. Integrating payment gateways with various travel platforms and booking engines can require technical expertise and resources.

OTA Online Travel Agency & Online Travel Agents

Providing convenient, easy to understand payment processing that is secure and robust is a necessity for todays travel agencies. Credit cards, debit cards, digital wallets nd payment terminals for face to face transactions where the cardholder and card are present along with other alternative payments are increasingly the norm. Bringing booking engines, reservation systems websites and electronic invoicing together can be a major hurdle for travel agency owners.