The coronavirus pandemic has had a huge impact on businesses across all industries, and some of the hardest hit are in the travel sector. There are travel bans in place across the globe, some of the tightest border restrictions we’ve ever seen in peacetime, and ghost flights taking off without passengers – who have either chosen to stay at home or have been enforced to. As a result, travel has hugely subsided across the entire world.
Consequently, not only do travel businesses lose sales revenue from consumers who can no longer make the flight, but they are likely to see the same consumers instigating chargebacks to retrieve their money – one travel company has already seen an increase of 300% in chargebacks in one week alone during the pandemic. With such disputes, not only are businesses losing money on goods and services, but they also end up paying fees to cover administration costs associated with handling them.
What’s more, many customers are looking to free up money from past transactions and, in a panic, are going to their banks to claim it back. In addition, statistics show that 40% of consumers that file an uncontested chargeback swill file another in 60 days. As a result, travel operators and airlines are experiencing a huge influx of illegitimate chargebacks, also known as friendly fraud. Companies in the travel sector should expect this type of fraud to increase three-fold before COVID-19 begins to subside, with the vast majority still to come.
A key challenge with the travel sector is that it’s already inherently risky, with labour, fuel and real estate becoming increasingly expensive. Therefore, travel businesses already tread a fine line when it comes to maintaining margins, making them less prepared for unexpected chargeback surges that could be massively damaging.
Taking a long-term approach is critical
With all this taking place, businesses operating in the sector must constantly adapt the way they’re responding to the virus. At the moment, many are rushing their strategies and are taking a short-term approach, resulting in quick, harmful decisions.
This needs to change. What money they have saved now likely won’t be available to them once the virus has subsided and lockdowns have been lifted, so travel businesses need to move away from a short-term approach and should begin planning for their recovery following the pandemic. This will greatly reduce the number of businesses filing for insolvency when it is all over and will go a long way towards protecting the economy and supporting its restoration.
As part of this, travel companies should be mitigating chargebacks and friendly fraud. The pandemic striking this year could easily result in a 50% year-on-year increase in chargeback filings in the travel industry when all is said and done, and it’s essential that this is budgeted for. To prioritize survival, they would be well advised to shift their focus from keeping customers happy and instead should defend their revenue and business to ensure they are around to serve thankful customers in the future.
Travel businesses aren’t alone
Fortunately, over the past weeks, Visa has been making some positive first steps towards supporting travel businesses with this huge influx of chargebacks by implementing its COVID-19 Dispute Monitoring Program, which will flag any chargebacks that are inconsistent with its current rules – this includes any fraudulently filed chargebacks. If a dispute is deemed invalid, the issuer will be asked to reverse it.
Furthermore, the card scheme has made changes to its suite of compliance programmes which focus on excessive dispute rates. As a result, there is a freeze on threshold penalties and airlines won’t be penalised for the number of chargebacks they receive.
While these changes will offer travel companies help with their uphill battle, giving them more leeway when managing chargebacks and lessening the burden of friendly fraud, there is still more that can be done by regulators and card schemes to help businesses through the pandemic and in the future. For example, chargeback policies and best practices could be standardised across institutions and verticals to help build a more consistent and stable payments environment. Yet, Visa’s recent changes are still a positive advancement towards the survival of the industry and will be greatly beneficial for those operating in it.
What travel businesses can do in the meantime
With the aid of these new rules, businesses can begin to focus on implementing strategies that will help them protect revenue in the long-term. They can begin by optimising processes internally, ensuring they have the right resources to deal with increased customer enquiries while keeping accurate accounts of purchase information in case it needs to be revisited later.
What’s more, refunds will be taking a toll on travel businesses’ bottom lines in addition to chargebacks, so travel companies should begin building strategies to counteract this. This can include offering monthly memberships that create new revenue streams to customers that file refunds, allowing them to redeem trips for an extended period.
However, one of the most important things they can do is learn how to mitigate chargebacks and friendly fraud. It’s an issue that’s going to progress rapidly as the outbreak continues and will have a huge impact on the number of businesses that file for insolvency following the pandemic.
About Monica Eaton-Cardone
Monica Eaton-Cardone is the owner, co-founder and Chief Information Officer (CIO) of Chargebacks911, the ecommerce industry’s preeminent risk mitigation and chargeback management service provider. Monica specializes in chargeback triggers and threats, aiding to reduce the liabilities and costs related to the entire dispute and chargeback process. She works with banks and merchants and has a background in technology and consumer-behavioural science. She has headlined business conventions, tech conferences and ecommerce expos all over the world, and was recently recognized for her hard work by the Retail Systems Awards where she received the Outstanding Individual Achievement Award. Her insights on digital threats, online fraud, friendly fraud and risk mitigation are a by-product of her passion for creating both revenue and customer sustainability.
About Chargebacks911
Founded in 2011, Chargebacks911 is the first global company fully dedicated to mitigating chargeback risk and eliminating chargeback fraud. As industry-leading innovators, Chargebacks911 is credited with developing the most effective strategies for helping businesses maximise revenue and reduce loss in a variety of industries and sectors within the payments space.
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