Have you bought something that isn’t as described? And has the retailer refused to give you a refund? Through a chargeback, your bank can try to get your money back on your behalf via the card network rules. While chargebacks aren’t new, they pose particular challenges for the travel industry.
Since the disruption seen during the COVID-19 pandemic, the travel industry has witnessed an explosion in chargebacks, with data from Chargebacks911 suggesting one in every eight chargebacks is related to travel purchases. In our own research of the industry from 2022, we found that airlines and travel agents were seeing 50% more chargebacks on average compared to 2019. For many businesses, it was a 100% increase. There are several dynamics at play.
Firstly, due to significant levels of disruption during the pandemic, traveler awareness of chargebacks grew. During 2020 and 2021, increasing numbers of travelers turned to chargebacks in order to recover their funds, which means more people are now aware that chargebacks are an option.
Concurrently, many issuers have made it easier for cardholders to initiate a chargeback. Quite rightly, as the industry digitalises, so too the chargeback process has become simpler for cardholders. Often a chargeback can be initiated in a few minutes using a banking app on a mobile phone, and many issuers will credit the cardholder’s bank account while the dispute is in progress. The ease of the process itself appears to have also contributed to the significant growth in disputes.
The chargeback process exists to protect cardholders, and this level of protection is one of the reasons that cards remain such a popular payment method, particularly where relatively high-value travel expenditure is concerned. But unfortunately, the system is open to abuse, with fraud rates on the rise, potentially impacting travel companies.
Industry estimates suggest that by 2023 as much as two-thirds of all chargebacks will be ‘friendly fraud’, where merchants shouldn’t be held liable. Friendly fraud occurs when a customer makes a purchase with a credit or debit card and then disputes the charge with their bank, even though they don’t have a legitimate reason to do so. But unless the merchant is able to defend a chargeback, the process tilts in favour of the cardholder.
In travel, a customer might miss a flight or decide not to travel. If the travel cost isn’t covered with a flexible ticket or insurance, then there’s the temptation to raise a chargeback. There have also been reports of travelers submitting chargebacks on more spurious grounds, for example, where they haven’t received the signature cocktail during a flight or when the flight was ‘unreasonably turbulent’. This is the type of chargeback request the industry needs to be empowered to challenge, to protect revenue so that it’s better placed to settle legitimate disputes for travelers.
Given the recent growth in chargebacks, now is the time for the travel industry to ask whether it is well-equipped to handle this volume of disputes. Typically, chargebacks are still handled manually by internal teams at airlines, hotels, and travel agencies. For airlines and agencies with centralised payments departments, these teams are often skilled enough but rarely have the resources to scale up. Unfortunately, for most hotels, payments are handled locally by each property due to the franchise ownership model. That means employees working at the front desk are often tasked with responding to chargebacks during quieter night shifts.
Another major difficulty is easily obtaining the right information to allow a chargeback to be challenged. In the case of airlines, it should be possible to know with a high degree of certainty whether a traveler flew their ‘ticket’ or not, or whether the flight was delayed and if so, by how long. These are basic first steps in responding to chargebacks – and a simple way to filter out those disputes raised when then the traveler was in fact late and missed the flight.
Amadeus runs the core passenger service systems and ticketing functions for many of the world’s airlines. These systems contain key pieces of travel information that can be automatically introduced to an airline’s chargeback management process. We also handle payments for a growing number of travel companies that rely on our payment gateway to manage their complex global payment flows. Our merchant portal, Xchange Payment Platform (XPP), provides granular insights into acceptance rates, authentication, and the performance of acquiring partners. We’ve decided to bring these capabilities together to support the travel industry in automating how it manages chargebacks.
When an airline receives a chargeback, the system powered by Chargebacks911 can automatically retrieve the relevant travel and payments information in order to prepare an automated response to most chargebacks. If the dispute is more complex, then it is handed off to a team member to investigate in greater depth. We’ve also integrated chargebacks into XPP, so anyone at the travel company can log in to see the volume and status of ongoing disputes across the organisation at any given moment.The travel industry is making payments a strategic priority. Airlines, hotels, and travel agencies increasingly see the value in taking a more proactive approach to managing their complex cross-border payment flows, and chargeback management is an increasingly important part of that effort. With levels of disruption still higher than average and travelers more aware of the chargeback process than ever before, now is the time to tackle the chargeback challenge.
This editorial piece was first published in The Paypers' Cross-Border Payments and Ecommerce Report 2022–2023, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally.
Jean-Christophe is an experienced payments professional focused on bringing Amadeus’s trusted travel payments solutions to market. Before joining Amadeus, he held senior product and strategy roles at Visa Europe. Jean-Christophe holds an MSc in Engineering from École Centrale de Marseille. He started his career at Gemplus, now part of Thales Digital Identity and Security.
Amadeus offers services to travel companies, helping them take payment from their customers, pay suppliers, and optimise both. We apply payments global expertise and a network of trusted partnerships integrated into our smart payment hub to provide travel companies and their customers with a smooth payment experience.
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