The Travel Space is Changing. Could New Technologies Make Transformation a Smoother, More Secure Process?
The Spring Break season is upon us. Both the Memorial Day weekend and the start of summer are just around the corner as well. And, while it’s still too early to have any hard numbers, the forecast for travel in 2023 looks promising.
Recent data published by the American Automobile Association (AAA) found that international travel bookings over spring break are up 30%, as compared to last year. Bookings for international travel, in particular, are very robust. Tourists from the US are taking advantage of the strong US dollar and leveraging favorable exchange rates against global currencies like the Euro, the UK Pound, and the Japanese Yen.
Families are “making up for lost time,” as AAA Senior Vice President of Travel Paula Twidale put it. European cities including Paris, London, Amsterdam, Rome, and Barcelona are among the leading destinations for US travelers in 2023, based on booking data.
That’s all great news for travel companies, many of which are still trying to regain their footing following lockdowns, travel restrictions and sluggish post-covid reopenings around the world. However, there are a few dark clouds on the horizon.
If you’re operating in the travel and hospitality space, now is a good time to start preparing for what may come next.
Economic Uncertainty Forecast in 2023
News cycles over the past year have been dominated by mounting fears about a potential recession.
Nearly two-thirds of surveyed economists believe there will be an economic downturn of some kind in 2023. The upshot is that most of those economists forecast a relatively mild, short recession; perhaps only a quarter or two before activity picks back up. The problem is that the impact of a recession ripples outward beyond the strict limits of the recession itself.
Consumer confidence can dip before a recession begins. And, it can remain depressed even after the market rebounds.
Then, of course, there are ongoing concerns about inflation. Core inflation averaged 4.1% per year between 2020 and 2023. In terms of raw purchasing power, this means $50,000 in March 2020 would be equivalent to nearly $57,800 in March 2023.
Inflation may push prices high enough that people who had travel booked far in advance are now balking at the cost. This could lead some to experience buyer’s remorse, and to seek out refunds on pre-booked travel. Even worse, they may turn to other avenues to recover their money if refunds are unavailable or not easily accessible.
Fraud Activity Surging in the Travel Space
Of course, that’s not even accounting for criminal activity, which is more of a concern in the travel space than ever.
A clear trend in fraudsters targeting travel and hospitality was observed as early as 2021. Data from TransUnion found that attacks on the travel & leisure sector increased by 47% in Q2 2021, as compared to the same period a year earlier. All totaled, global fraud rates for travel and leisure companies rose nearly 156% in 2021.
All totaled, the International Air Transport Association (IATA) puts the cost of credit card fraud committed against airlines at $1 billion annually. That’s still not accounting for the broader impact, though, as each dollar lost to fraud will cost you $3.75 due to chargeback fees, wasted overhead, unnecessary admin costs, and bookings that are ultimately never paid for.
There are also the longer-term issues to consider. For instance, if you generate excessive fraud-related chargebacks, you will be forced into a fraud monitoring program. You may lose your ability to process payments altogether if the problem can’t be resolved in a timely manner.
Now is the time for all airlines, OTAs, and other operators within the travel space to start taking stock of their operations, and ensuring they have the necessary protocols in place to defend against sources of revenue loss. Where do you start, though?
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Is Artificial Intelligence the Answer?
Artificial intelligence may be one of the solutions to this problem.
Front-line fraud detection in eCommerce relies on quick analysis at the point of checkout. Artificial intelligence tools can analyze extensive data sets in real time. AI can even incorporate data derived from multiple sources.
This presents obvious advantages, from faster transaction resolution to more accurate decisioning based on much larger data sets than can be generated at the individual merchant level. AI-enabled fraud detection in the travel space might employ:
The three tools listed above are just a few examples. An advanced AI system can pull data provided from these technologies, as well as conventional fraud detection tools, to develop a more complete impression of each transaction. This system could simplify your understanding of your risk profile and develop a dynamic view of each individual payment.
Of course, while AI presents some fascinating opportunities for the travel space, it can only function effectively as a component of a larger risk-management strategy.
Risk management in the contemporary travel space demands a comprehensive solution combining conventional and machine-learning tools, along with human expertise. This dynamic approach is the only way to effectively minimize the risks posed by criminal activity, as well as other threats like consumer chargeback abuse, errors, and procedural oversights.
The Solution is Here
Building — and maintaining — a workable strategy for fraud and chargeback management is extremely difficult. It demands a significant up-front investment in tools, technology, and hardware. You also need a team dedicated to parsing transaction data, reviewing suspicious transactions, and responding to invalid dispute claims.
To make things even harder, the only data you can access is your own. The lack of data transparency means you can’t pick up on broader trends in criminal activity or consumer behaviors. You can’t track how those trends relate to your business or to other nodes in the travel ecosystem.
In other words: you’re flying blind.
Chargebacks911® was the first brand on the market to specialize in end-to-end chargeback management. We use industry-defining, proprietary technologies to segment chargebacks based on their true source, rather than the reason code. Our experts can then deploy the right solutions necessary to prevent chargebacks, and to recover revenue that would otherwise be lost due to invalid claims.
We’ve forged strategic partnerships with some of the most influential names in the travel space to help deliver vital solutions for merchants in travel and hospitality:
Ready to learn how Chargebacks911 can help protect you against fraud and chargebacks? Click below to request a free demo and get started today.