In today’s market, if a business is not capable of accepting credit cards, it translates to a loss in a sales opportunity. Customers prefer the convenience and credit cards offer a form of convenience when it comes to spending. Other payment option besides cash payment must be given to customers. Allowing customers to swipe their credit cards is the way to go to grow the business.
Travel merchants who want to start to accept credit cards need to apply for a Travel Agency Merchant Accounts. The product or services offered by the company plays a major role in determining the approval of the application. It is difficult for businesses that are within the umbrella of the travel industry to get approval for travel agency payment processing because they are all considered as high risk businesses.
It may be surprising to find out that travel-based businesses fall under the high risk umbrella because the travel industry sells a great service that brings happiness to customers and does not attract fraudsters at a greater rate than any other type of business. The main question is where the said the high risk for travel businesses comes from.
1. FUTURE DELIVERY
An ordinary traveler often books and pays for a trip in advance which is typically 60 to 90 days before the date of the trip. Although there are the so-called last-minute travelers there are more travelers that do advance booking. 60 to 90 days is a long period and a lot can happen within this time especially for the travel businesses that have a history of stability issues such as a volatile sale. A traveling merchant may go out of the business during this time and the cardholder will not receive the purchased service leading to chargeback filing of the customer. In some cases, it is the customer that faces problems with this or her schedule and May simply has to cancel the booked trip. But travel businesses often have a no refund policy leaving the cardholders no choice but to file for chargeback through their credit card issuing bank because they have not been able to use the travel service.
2. TICKET SIZES
Travel is usually expensive. The ticket sizes for travel based businesses range from affordable package trips of $1000 to a luxurious and prestigious $20,000 cruise trip. A chargeback or dispute from a customer will involve a serious amount of money and may potentially be painful for the credit card processor especially for cases where the merchant is not able to give the money back to the cardholder.
3. TRANSACTION VOLUME
Same with ticket sizes, transaction volume affects the credit card processor especially for travel businesses such as airlines that have too many customers on a daily basis. Should the airline fail or something happen that makes the flight unable to take-off and there are lots of chargebacks that may roll in. If the airline files for bankruptcy protection, it is the processor that will have to pay out all the chargeback. Thus, it can bring devastating financial losses for processors.
With many of today’s travelers prefer to make travel reservations online, it is just imperative for online travel businesses to acquire a merchant account for travel business that will enable them to accept card payments.
What can a travel business do to get the best travel agencies merchant account service?
- Prepare a cover letter when submitting the application form and documents. A cover letter increases the chance of the merchant being able to highlight the company’s strengths and its expertise in the travel industry. It can help to address the areas of the business that may be perceived to be risky and provides the avenue to state as to how the said business is different from others. For the future delivery concerns, a merchant may discuss the idea of limiting how far in advance a customer can pay for the services. The background and work experience of the company directors may also be attached should they have expertise in travel.
- For an established business with a history of having a travel industry payment processing solutions, processing history must be submitted should it want to switch to a new processor which can significantly strengthen the application. The general rule of thumb is submitting 3 months of processing history, but since the travel industry is considered as high risk, a one year worth of statement may be asked for the underwriters to get the average volumes of sales transactions, refunds, and chargeback activity. For startup businesses that have not been able to do travel agency payment processing yet, the cover letter can be helpful in helping to show the processors that the company is in good shape financially with the necessary attachment of company financial information.
- The most powerful tool that can convince the underwriters that the company is stable and will continue to do well in the future is strong business financials. In cases of startup companies, a cash-rich company financial is not really necessary, but what matters most is having significant investors on board adding to the credibility of the business. In the cases of established businesses, a strong cash flow helps in demonstrating a capable management.
If the underwriter sees the potential of the business, a conditional approval with special terms may be given even for those categorized as high risk. The special terms that may be asked are as follows.
- A fixed security reserve which is either a specific amount of money that is paid by online travel merchants upfront or through accrual and deducted for every sale until it has been paid up.
- A rolling reserve which is accrual paid but there is no specific amount of reserve is set. IT is a continually rolling percentage of the total sales.
- Delayed Funding or having a short delay before the merchant receives the funds after a card transaction.
Although Travel Merchant Accounts are harder to get approved, almost any legitimate travel business can still achieve approval with effort and strategy.
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If you’re ready to start the application process for your merchant account, iPayTotal is here to help. Simply Click here to get started. If you have additional questions about our merchant accounts or other services we offer, call us directly at +44 800 776 5988 or get in touch with us through our website.