Has customer convenience gone too far?
Balancing technology and customer demand, there are some who could argue we have hit a payment innovation goldmine. Consumers now have more payment methods at their disposal and newcomers keep hitting the market to serve those who relish the growing convenience of eschewing their wallet and going digital.
But growing choice for consumers can put merchants in a tight spot. Not only is the pressure on to accept the many new alternative payment types, across borders, 24/7, but they must ensure customer satisfaction is kept intact at the same time. If a customer detects a hint of an issue with their transaction or displeasure with the service provided, they’re likely to bail as fast as possible to the next competing merchant – often leaving a trail of payment disputes in their wake.
Taking it to the skies
The move to a digital-first society that demands instant gratification has seen the travel industry in particular hit hard by the change in consumer behaviour – and, to some extent, it’s a problem of its own making.
In a mission to offer tailored packages (and make a pretty buck while doing it), most airlines and travel agents (TAs) offer an abundance of chargeable add-ons, such as seat reservations, hold luggage, hotel and car hires, and even in-flight meals. Most of these bookings no longer happen at the same time and often come through various channels. By losing that unity, travel merchants are in danger of failing to link itinerary and ancillaries to the original booking, creating more frustration for the customer if anything goes wrong.
Skyrocketing disputes
With expectations for speed and seamlessness in the digital era transposed to the physical experience, more travel consumers are growing impatient and frustrated with anything except a fully connected holiday. Consequently, payment disputes are through the roof.
But the dispute process hasn’t advanced quick enough to deal with vast changes in customer behaviour and, with no insurance necessary to file a dispute, we’ve seen a loophole form. Now, those who simply change their mind on a booking or experience a hint of disconnect in their plans can give their bank a call and get their money restored.
Those who exploit this loophole are friendly fraudsters – they make genuine transactions but report false claims or heighten issues to get around cancellation fees and non-refundable bookings.
What was previously a single transaction (an airplane seat, for example) has become three, four, five or six transactions, coming from various channels and merchants; airlines and TAs are seeing transaction disputes multiply, too. This could be a 600% or higher increase in dispute volumes, simply due to evolving payments processes and extreme changes in customer behaviour.
A merchant’s loss
According to IATA (the International Air Transport Association), international tourists travelling by air are expected to spend over USD 750 billion (GBP 540 billion) this year, a rise of 15% in just over two years. But with demand for faultlessness and flexibility at an all-time high, we predict that much will go straight back into consumers’ pockets – whether they redeemed the purchase or not.
To provide an experience that protects revenue while preserving a positive customer experience, merchants must eradicate friendly fraudsters. By doing so, they can focus on providing top quality services, and know that consumers who report issues are honestly experiencing issues which the industry can look to resolve. This can prove difficult, though – 58% of merchants are still unable to identify false disputes.
Industry changes
Luckily, the tired approaches to chargebacks are finally being challenged. This year, Visa has implemented Visa Claims Resolution (VCR), which is designed to make transaction disputes smoother, automatically assigning liability in most data-oriented cases, and hopefully, helping merchants identify and eliminate illegitimate disputes.
So, is VCR a silver bullet for this long-lived and resilient problem? Sadly, we suspect not. But by ensuring transaction data – such as ticket or boarding pass scanning information, check-ins, vehicle rentals, payment type or reward points used, and add-ons – is promptly and correctly recorded in the new system, we can work toward eliminating disputes before they occur, for good.
New card scheme rules are in very early days. Until implications are identified, merchants – not just in the travel industry, but wherever and whenever they charge for ancillary services – will still require long-term support to handle payment disputes effectively and maximise their risk mitigation efforts. To find out more about VCR, download our latest guide.
About Stefano Petrazzoli
Previously at Booking.com, where he built its Global Payment Operations team and scaled first-class chargeback and payment trend analysis, Stefano leads Travel Relations at The Chargeback Company, creating opportunities for cooperation and awareness for the company’s travel-specific merchants, suppliers, affiliates and financial institutions.
About The Chargeback Company
The Chargeback Company, known as Chargebacks911 outside Europe, provides comprehensive and highly scalable solutions for chargeback compliance, handling services and fraud strategy management. The company helps decrease the negative impact of chargebacks, thereby increasing revenue retention to help ensure sustainable growth for every member of the payment channel.
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