The travel industry looks quite different now than it did ten (or even five) years ago.
The disruption caused by the pandemic, along with the globalization of our society and economy, has made it easier for travel agencies to connect with global customers—while also making it slightly more difficult to plan ahead for disruptions, fraud, and other related challenges.
What can you do as a travel agency? You’ll need a specialized approach for your payment solutions (and credit card processing, specifically).
We have experience working with travel businesses and have broken down the basics of high-quality, high-risk credit card processing to help ensure you have the services you deserve.
Why Your Travel Agency is Considered ‘High-Risk’
First thing first: why might your travel agency get classified as high-risk? After all, you’re not selling “taboo” products or services like cannabis products or adult webcam services. So, what gives?
Well, it’s important to know that not all travel establishments are considered high-risk. However, most of the time, what causes this classification of some travel agencies is the higher chargeback rates.
This is mostly caused by booking cancellations made long before service delivery. The “time gap” between making the purchase and receiving what the customer paid for leaves room for potential disruptions, which might lead to disputes.
Sometimes, these changes are unavoidable and related to external factors like the weather or political unrest in traveler destinations.
Other times, the length of time between the purchase and the trip gives the customer (too much) time to reconsider the purchase. So, they’re more likely to simply change their mind.
Regardless, whatever the reason behind an initiated dispute, they’re unfortunately quite frequent in the travel industry and inevitably lead to higher chargeback rates.
Payment Processing for the Travel Industry 101
Despite being in the same sector, every travel business is unique (and that couldn’t be truer when it comes to travel payment processing specifically). However, the industry relies on three main methods for transaction processing.
Direct Payments
Accepting payments directly through credit cards offers several benefits.
As the most classic method of conducting a payment transaction, it’s often also seen as the most convenient, at least from the customer’s point of view.
It ensures that the funds are being transferred securely and settled immediately—both things customers obviously love.
However, even direct payments have their potential drawbacks.
Credit card payments are an easier target for chargebacks, for instance. This means the very root of your business’s risk level can easily be affected if you’re unable to handle the chargebacks timely and properly.
In addition, the acquiring fees for direct payments are generally higher than average.
Credit Card Authorization Form
Like direct payments, using credit card authorization forms for transactions comes with a few pros and cons.
The benefits are:
Enhanced security with additional fraud protection
A clear record of the customer’s consent to charge their card
Less hassle for the customer, which can mean less missed payments
Despite the few benefits, using credit card authorization forms as the primary payment method on your platform is incredibly inconvenient, as it’s very manual and outdated.
Ultimately, it tends to lead to a lot of manual errors and wasted time during a process that could be optimized with more efficient options.
Buy Now, Pay Later
The BNPL payment method is growing in popularity in the travel sector. That’s because, in most cases, the services provided by travel agencies are rather expensive.
The BNPL option, though, gives everyday customers the option to pay for a larger purchase over time.
Although this payment method makes your service available to more people, it presents additional challenges for your business that you’ll want to be aware of before offering it.
As travel plans are usually made well in advance, it leaves room for more cancellations and more potential financial losses.
The 'buy now, pay later' model is changing travel payment systems, offering appeal to customers by enhancing affordability. However, it introduces complexities for businesses, as the advance booking nature increases financial risk exposure.
Credit Card Processing for Travel Agencies: Our Tips for Success
At the end of the day, to ensure a smoother experience for your customers, the process of making a purchase has to be as seamless, secure, convenient, and easy as possible. To do that, though, you have to take some extra steps.
FastoPayments has worked with numerous travel companies, and we think we’ve figured it out pretty well. Here are a few tips and tricks our payment experts would give to any merchant in the travel industry.
Limit Chargebacks
As mentioned before, chargebacks are typical in the travel industry (and other high-risk industries). So, it’s important to do everything you can to limit these risks.
A few chargebacks here and there isn’t anything huge to be concerned about. However, maintaining a healthy rate should be a top priority.
Partnering with a payment service provider who knows the risks of the industry like the back of their hand is crucial here.
Those types of expert service providers can equip you with the right prevention tools, like chargeback alerts, for example. In addition, they can help you quickly resolve any payment-related issues that arise and, if you get lucky, even enhance the operational side of your business.
Don’t Oversell Your Offerings
Honest marketing is key to avoiding customer dissatisfaction. To achieve that, our specialists recommend providing realistic expectations of your services.
This may include high-quality photos of the accommodation or destination and detailed descriptions of everything included, for example.
Additionally, communicating with the customer to ensure their expectations are aligned with the service you provide can help quite a bit here.
Keeping your customers informed about any changes or updates to your service, offering clear refund policies on your website (more on that below), and maintaining transparent marketing can all help significantly reduce your customers’ cancellation rates.
Implement Clear Payment Policies
Implementing transparent payment policies that are easily accessible and understandable to your customers can help prevent a customer from initiating a dispute (or help them navigate their options in the case that they do initiate one).
If policies regarding processing charges, cancellation fees, and refunds are clearly stated from the moment of purchase, your customers will have a better understanding of what to expect and what they can do if their plans change, they experience disruptions during their trips, etc.
Our suggestion is that you post these terms in a designated section on your site and attach them to every invoice.
In addition, having a responsive support team that can address customer complaints appropriately can help you promptly assist with these matters as well (before they turn into larger, more costly disputes).
💡 Don’t forget to check your credit card processing fees from time to time, too. While all merchants have to cover these, they are often higher for high-risk merchants.
Consider Flexible Refund Policies
Building trust with your customers is important to ensure client loyalty and build your clientele long-term (hopefully repeat ones!).
That’s why it’s important to meet them halfway by adopting flexible refund policies (as long as it makes sense for your business, of course).
You can easily do this by setting a reasonable time limit for a full refund or a clear and protected cancellation window.
Our favorite part about this approach is that it could potentially decrease your chargeback rate.
It's always good to have some sort of insurance or union that can help you avoid bankruptcy, which is common in the travel industry due to high cancellations, delays, and other common travel challenges. We suggest every travel business we work with to ensure they're financially covered, because if they do go bankrupt, everybody loses.
Work with the Right High-Risk Payment Processing Company
As we all know, high-risk industries are often confusing and complex to navigate.
This often leaves high-risk business owners to their own devices. Without the proper payment processing guidance, they’re left to figure things out through trial and error—something that can get incredibly expensive if you’re not careful.
We’ve seen this firsthand at FastoPayments, where we’ve spent years helping various high-risk businesses, including those in the travel sector.
We proudly consider ourselves experts in high risk and have made it a point to provide each and every merchant we work with a personalized approach that’s tailored to a T according to their specific needs and areas of concern.
In addition, we provide businesses with the latest fraud and chargeback prevention tools, along with risk assessment and mitigation strategies. Based on all that experience, here’s what we think you should consider for your travel agency.
Tip 1: Avoid a ‘One-Size-Fits-All’ Approach
As mentioned, high-risk travel establishments need dedicated solutions and a specialized approach when it comes to processing transactions.
Generic payment processing solutions simply aren’t designed with these inherent risks and needs in mind. Even if you qualified for them, you’d likely find they fall short.
Therefore, picking a payment partner whose expertise lies in high-risk transactions is your best bet for maintaining and growing your business without the limitations of standard payment services.
Our payment team has put together a list of green flags to look for if you’re a travel merchant on the lookout for the right solution provider:
Fraud and chargeback prevention tools specifically tailored for the higher risk
Risk assessment and mitigation strategies
Timely assistance from a knowledgeable support team
Multi-currency processing options
Various payment methods
Extra security measures
If your preferred processor is able to check off the boxes above, you’ll be in good hands.
Tip 2: Get Specific Services for Larger Travel Agency Merchant Accounts
Bigger travel agencies that are looking for a merchant account should consider factors like their:
Transaction history
Current volumes
Target market
The services meant for businesses with a larger audience are designed for the specific challenges they face.
They include features and niche-specific services that can keep up with the higher demand and typically include more robust fraud prevention systems, load-balancing, and comprehensive reporting features.
All of these features are important if you manage large-scale services, track transactions, and want deeper insight into the payment side of your business, as well as overall statistics and market trends.
So, ask about these when looking for the right high-risk payment processor.
Get a High-Quality Travel Agency Merchant Account Now
Ultimately, applying for payment solutions or a merchant account that’s tailored to the travel industry is an individual process. It requires preparation, research, and a general understanding of your business, what you’re looking for, and the risks involved.
We know that may sound like a lot, but that’s why we’re here to provide you with an expert opinion!
For payment gateway solutions from a provider who understands the dynamic needs of travel agencies, get a free, no-obligation quote for a travel merchant account here.
Whether you’re a new travel agency or have been serving travelers for years, we’ll review your business information and get back to you as soon as possible.
