According to Deloitte, a global survey company, the travel industry gross bookings reached $1.6 trillion in 2017, which makes it as one of the largest and fastest growing sectors in the world that accounts for a whopping 10.2% of the gross domestic product worldwide. It can be expected that travel agencies will have no problem in securing travel agency merchant accounts but it is not easy for travel agencies to get travel agency payment processing because travel business is considered as high risk. It is surprising because most people associate “high risk” credit card processing with sinful industries like gambling, firearms, and tobacco. But not only this type of industries fall under the “high risk” category, but even travel agencies also fall under this type because of its excessive chargebacks. Once a business is categorized as “high risk” it can be difficult for them to get a merchant services provider. Many merchant account providers refuse to approve a merchant account for high risk businesses or if they do, higher rates and fees are charged and are given not so fair contract terms as well as vulnerability so sudden account closure.
Travel businesses such as travel agency, tour operators, cruise business, or other travel company are all labeled as high-risk and this affects their ability to get a merchant account for travel business. Although it is not easy high risk travel business can still secure travel industry payment processing solutions to be able to accept credit card payments.
Why travel businesses are considered high-risk?
The main reason why travel businesses are considered high risk is all due to high rate of chargeback caused by the fact that most transactions of travel agencies are placed and are paid in advance long before the delivery of the service to the customer. Unfortunately, a customer may have unexpected situations and may decide to cancel the booked trip. Since it is common for travel agencies to require deposits and impose a no-refund policy the customer may just opt to file a chargeback with the card company.
What are chargeback costs and its consequences to travel agency merchant accounts?
- For every chargeback filed by a customer, the merchant has to pay a corresponding fee. Even for cases where the customer cancels the chargeback after it was filed, the merchant still has to pay a fee which is usually the administrative cost that is associated with the process.
- There will be a loss of revenue if the customer availed the travel service for the first few days then canceling it later for some reason that the services rendered did not fit their expectations.
- If the travel agency payment processing has a predetermined threshold for monthly chargeback rates, excessive fines can be levied against the travel business. Worst case to happen is for the termination of the travel agency merchant account by the acquiring back especially for chargeback rates that are way above the acceptable threshold. In this case, the travel business will be unable to accept credit cards as payment and thus will lead to the loss of potential sales for customers who opt to pay by the card.
- Moreover, once a travel agency has a terminated merchant account for travel business, it will be listed and will be reflected in the business record, This will affect future application with different processors.
Chargeback even a single one can be dangerous for business and may put a threat to the business’s longevity and sustainability.
Why do travel agencies need a merchant account for travel business?
Getting the best travel agencies merchant account service is of utmost importance for travel agencies and businesses that will enable the business to accept card payments (debit and/or credit card) thru online, in-store and even over the phone. Travel agency merchant accounts provider helps the business in expanding the business payment acceptance option that can potentially increase sales because customers nowadays prefer a variety of payment methods.
Tips in getting Travel Agency Merchant Accounts
The merchant must first do research among several travel agency merchant accounts provider before applying. It is necessary to get a better understanding of the services and rates offered.
- The provider must have an experience in handling and operating accounts within the travel industry.
- A multi-currency travel agency payment processing must be included in the service to be provided. This ensures that the business can sell their services to customers overseas.
2. ORGANIZE THE FINANCIAL RECORDS OF THE BUSINESS
Simultaneously, the financial records of the business must be prepared and organized. Some of the basic paper works that need to be submitted when applying for a merchant account for travel business are:
For sole proprietors,
- The resume of the business owner.
- The copy of personal utility bill.
- Proof on being a sole proprietor.
- Business overview or marketing plan.
- Bank statements from the past 90 days.
- The company profile.
- Articles of Incorporation.
- Business bank statements from the past 90 days.
Other important documents to provide are:
- Company’s processing history over the last 90 days (if applicable) including the amount and volume of transaction, refunds, and chargebacks
3. TALK TO THE AGENT
Knowledgeable agents can be very helpful in discussing the possible merchant account services solutions that can be provided by the provider.
4. READ THE FINE PRINT
One can never be too careful when it comes to legally binding contracts or agreements. It is advisable that the merchant agreement must be understood by the merchant before signing. Double checking must also be done to make sure that there no hidden fees, no extra costs or no clause that could possibly change the agreed-upon conditions. A lawyer can also be hired to help the merchant with the legal language in the merchant account contract to be able to help avoid potential problems in the future.
Chargebacks must be kept low for merchants to be able to maintain their travel agency merchant accounts in good standing. Although facing chargebacks in business is unavoidable there are steps that can be undertaken to limit it.
How to fight chargeback in a merchant account for travel business
1. A clear payment policy must be clearly communicated and implemented to customers. This must be shown in the website and in-store brochures and must state the requirements for deposits and full payment as well as the time frames for both full and partial refunds as well as deposit condition. Cancellation and refund policies must not be in small print.
2. Give the customer an option for a refund than initiate a chargeback. The customers must be informed of the refund policy of the business.
3. Collaborate with a chargeback management company that helps businesses in managing their chargebacks.
We, at iPayTotal, assess each travel agency individually, we learn and analyze your method of doing business so we can board you with the acquirer that would feel most comfortable with your business model. This is the means by which we can give a reliable travel merchant account. Just by tuning in to your prerequisites.
The procedure is very simple, however, requires some documentation to the bank, to verify your information. An iPayTotal merchant expert will mentor you at each step to guarantee quick approval.