Providing a deeper insight into fraud and chargebacks in the travel sector, a new report has been unveiled by merchant dispute specialist Chargebacks911, as it revealed even a minimal reversal rate could have a significant impact on the sector. 

In conjunction with industry thought leader and travel research firm, Airline Information, it offers merchants an insightful look at the substantial scale of the challenge that chargebacks present to the industry and proposes solutions for mitigating chargeback threats and payment fraud events.

At a pivotal moment for the travel sector as it recovers from the pandemic, payment fraud reportedly leads to losses of around 1.2% of revenue (around $1bn annually) according to estimates from the International Air Transport Association (IATA).

This is set against a bleak backdrop across all sectors, with the pandemic causing a sharp rise in chargebacks. The merchants surveyed in the 2021 Chargebacks Field Report noted a 25% increase in chargeback issuances, and this trend is likely to continue.

Furthermore, off the back of a key period, the transaction journey within payments has evolved and the way in which bookings are made can have a major impact on the level of chargebacks. 

Christopher Staab, Co-Founder, Airline Information, stated: “The whole industry is acutely aware of the pressure it has been under over the last two years. However, there are clear and encouraging signs that the sector will experience not only a resumption of normal business, but a surge of consumers desperate to explore the world once again. Which is why we welcome this research from Chargebacks911 and encourage airline and travel merchants to continue to be proactive and remain vigilant in striving to keep fraud and chargebacks in check.”

Airline and travel merchants recognise the importance of engaging in the representation process. Two-thirds of airline and travel merchants respond to 76% of chargeback requests – significantly higher than the reported 43% response rate across all merchant verticals outlined in the 2021 Chargeback Field Report. 

Despite this, the results of the study issued a stark warning to the industry: a 10% chargeback reversal rate could prove to be a fatal blow to a travel merchant’s chances of survival in the post-COVID landscape.

Monica Eaton-Cardone, COO and Co-Founder of Chargebacks911, emphasised: “The travel industry has suffered the most devastating economic impact from the pandemic. It continues to lose revenue; refunds are requested on a massive scale and the ever-rising numbers of chargebacks spell the collapse of several travel providers worldwide. There’s been a clear structural change in chargebacks after COVID-19. 

“Travel is getting back to a new normal, and chargeback activity will follow suit. We’re seeing a surge of travel-related chargebacks, foreshadowing another round of ‘dispute contagion’ – a clear indicator of growing behaviour trends. Merchants can’t afford to ignore this problem.

“One of the reasons for the growing number of chargebacks is the lack of defence against friendly fraud. Once committed, most merchants don’t realise that if they let it go, they’re admitting fault – and inadvertently rewarding the wrong behaviour. 50% of those fraudsters that get away with it will do it again in as little as 60 days. 

“This doesn’t just impact the merchant’s business, it has a trickle-down effect for others, too. We’re seeing lots of very creative avenues for fraud and chargebacks being exploited. Merchants must be on their toes. It all comes down to knowing your customer and having access to more data to be able to identify suspect behavioral trends.”

Another unwanted impact of the pandemic is the surge in double refund rates, also known as Double Dipping. This occurs when a customer seeks a refund from both the travel company and their credit card provider. The research found an alarming 60% of respondents seeing an increase in double refund rates since the pandemic began. Yet despite the mountain of challenges the industry faces, there is much that can be done to mitigate these.

Eaton-Cardone added: “When you look at chargebacks in vulnerable sectors like travel and tourism, you need a full end-to-end strategy including front-end fraud prevention and post-transaction fraud management. It’s not just about identifying criminals; it’s about understanding what’s behind friendly fraud. Sometimes it’s truly accidental, and you don’t want to blacklist genuine customers. If you don’t have that intelligence, it’s going to affect your authorisation rates.

“Any merchant should focus on their core competencies, like improving the customer experience, and paying attention to customer service. I would challenge merchants to look at how they can make smarter decisions and recognise the technologies available to assist them. That way, everybody wins.”