What makes your travel merchant account high risk?
This is a question asked by our merchants frequently. The travel industry is different from the time when your transactions are usually keyed, and the time when the service is delivered has a lot of time delay. The customers have ample amount of time to cancel, refund or chargeback their service and the funds they have paid.T ravel packages tend to be seasonal, with peak season months generating an unusual spike in their “average” monthly volume, and chargeback’s pose a potential threat by travelers who are unable to complete their trip.
Being a part of a MO/TO (Mail Order/Telephone Order) or Keyed environment carries an increased risk of potential fraud or unauthorized use of a credit card. Since the credit card and cardholder are not present at the time of the transaction, the merchant has a limited ability to ensure the card is not being misused or that the proper AVS (Address Verification Service) information is provided. IPAYTOTAL stresses the use of Credit Card authorization forms in order to obtain the correct credit card number, expiration date, billing address, and signature of the cardholder. This makes merchant account for travel more vulnerable.
Large transactions which exceed the average sale amount for the merchant account also trigger security concerns. Merchants who do not inform their merchant processor of large transactions prior to charging the credit cards can trigger security concerns and cause funding delays and reserve holds. Educating and clearly communicating with the merchant on how to handle large tickets, volume spikes, and group bookings, prevents reserves, funding delays and/or other merchant account issues.
Another concern from the underwriters of merchant account for travel is the delayed delivery time frame. Delayed Delivery refers to the amount of time between accepting a credit card payment (whether a deposit or full purchase) and the time the cardholder travels. The client’s credit card is billed and the travel agent is paid, however, the trip the travel agent was paid for doesn’t generally take place for 2 to 3 months. This leaves a lot of time for things to change, and should the client not travel for some reason, the first thing they do if the travel agent does not issue a refund, claims a chargeback.
Why is so much information required for a travel merchant account?
Due to the higher risk associated with the travel industry, more due diligence is required during the new merchant onboarding process. This means underwriters of merchant account for travel need to review a range of documents to assure the business is compliant, financially sound, and a good credit risk. iPayTotal is unique because we underwrite merchants in-house before we submit their applications to the bank. Because our team of underwriters is experienced in high-risk, your business is presented to the bank with all required documents for a merchant account for travel and full disclosure, to engender trust and stability.
Presenting your business in the best possible light from point of the first contact is important because merchant accounts are essentially a line of credit from a processor. Because high-risk merchants have higher chargeback ratios and regulatory exposure, financial institutions are concerned they may violate card brand rules, laws and regulations. Complaints to the FDA and the FTC against a merchant create liability not only for merchants but can also hold processors accountable under Know Your Customer (KYC) regulations.
Once a high-risk travel industry merchant account is approved, payment processors set monthly processing limits, typically between $10,000 and $30,000 per month, for the first three-to-six-months. This gives processors time to develop a customer risk profile by evaluating payment flows, average ticket sizes, processing levels and chargeback ratios.
Maintaining a low chargeback ratio is key to maintaining a healthy merchant account. When chargebacks exceed card brand maximums, your merchant account is at risk of being shut down. If a merchant category has consistently excessive chargebacks, banks will sometimes shut down an entire vertical industry. For this reason, it is critical for high risk verticals to self-regulate and work collaboratively to establish industry best practices.
Many credit card processing companies do not want to take risk of merchant account for travel and deny services to this industry mostly due to credit issues, a bankruptcy or on moral grounds due to legal implications. Considering the apprehensions of risk related industry there are several high-risk merchant account service providers which provide merchant account services with normal rates. Just because you are a startup business does not alone classify for risk. It is an uphill task to get a merchant account for new businesses as they do not have an established credit card transforming history, large bank balances, in long time in the business which is lacking for a new business. It is best to have a good business plan, copies of supplier contracts, invoices, sales and quality assurance projects reports which give a legitimate and real hold about the new business.
We at iPayTotal are willing to join this booming industry. Our extended family of travel service provider merchants, with vastly different models and product sets, are equally committed to optimal results, performance metrics, and profitability. While products and services vary, all travel industry clients want affordable and easy high-risk payment card processing, which is our specialty.