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Travel Industry Costs

Travel Industry Costs

Managing Payments Costs the Industry Billions Each Year. The Solution: Better Fraud Management.

The good news is, things are looking up for travel agents. According to data published by Statista, the average travel intermediary’s profits as a share of revenue doubled from 6% in 2005 to 12% in 2015.

But of course, while profits are up, so are the costs of operation. Another recent travel industry survey reveals companies spent 5.4% of total revenue managing payments. This equates to a total of $74.5 billion paid out by travel operators to payment service providers annually.

Costs are even more burdensome for smaller firms who end up paying disproportionately high fees. On average, those reporting less than $15 million in annual revenue pay 7.5% of revenue to process payments. This is compared to just 3.8% for travel providers generating more than $1 billion in annual revenue.

The cost of managing payments cuts into profits and diverts investment away from improving performance and overall quality of service. We know you want to minimize costs wherever possible. So, why not start with a problem you can tackle right now…like travel fraud?

Did you know that total fraud costs in the travel space will exceed $25 billion a year by 2020? You can take action to stop some of those losses, recover revenue, and protect your bottom line today.

The Far-Reaching Costs of Travel Fraud

The airline industry loses nearly $1.3 billion annually as a direct result of online card-not-present (CNP) fraud. That sounds bad at first glance…unfortunately, the truth is much, much worse. You lose revenue any time fraudsters strike, but there are plenty of other, less-obvious ways that fraudsters cost you money:

False Declines

Businesses apply tighter standards for pre-transaction fraud detection. This generates false positives, as more legitimate transactions are flagged and declined.

Chargeback Fees

A successful fraud attack will result in a chargeback once the cardholder identifies the fraud. The merchant incurs a chargeback fee for each case filed.

Threats to Sustainability

Merchants who generate excessive chargebacks are placed in a chargeback monitoring program, or may lose their ability to process payments altogether.

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It’s no wonder researchers behind the above-mentioned study found 64% of travel professionals cite fraud as a barrier to adopting new technologies. And, those are just a few of the hidden costs.

Travel tech can be vulnerable to criminals; for example, loyalty points fraud costs rise every year. Then there’s friendly fraud, which is an increasingly common problem in travel payments. This form of post-transaction fraud involves a seemingly-legitimate buyer who completes a purchase, only to turn around and file a chargeback. Our research shows friendly fraud represents between 60-80% of all chargebacks filed.

The airline industry lost $763 million in 2013 as a direct result of chargebacks. And, given that friendly fraud incidents increase by 20% every year, these attacks could represent a major threat to your long-term prospects.

Fight Fraud. Reduce Costs.

Recovering some of those billions shelled out on payments management is possible. However, you’ll need to do everything possible to eliminate avoidable costs (like fraud).

“I’m already using an antifraud tool!” you say? Well, just one or two isn’t nearly enough.

A tool like fraud-scoring can be a very effective way to catch criminals who use stolen personal information. Going back to friendly fraud, though, a fraud filter can’t help you because friendly fraud is post-transactional in nature. The attack occurs weeks or months after the original transaction.

At Chargebacks911®, we recommend a multilayer solution for fraud. This allows you to intercept threats from a wider range of sources, as well as provide redundancy in coverage for more reliable and secure protection.

Fraud filters are important; in fact, we are partnered with several of the industry’s top providers of pre-transactional fraud screening. But one solution—even a powerful one—is not enough. What you need is the broader approach offered by a multilayer fraud solution.

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What Should a Good Multilayer Solution Entail?

A good multilayer solution for fraud will include multiple pre-transactional screening tools, including:

Address Verification Service (AVS)

This compares the billing address provided by the customer against the address on file with the bank.

Card Security Code

Often referred to as a CVV or CVC, this is the 3-digit code on the back of a payment card.

3-D Secure

This opt-in layer of verification works much like a PIN does in a card-present debit transaction.

Device Authentication

Identifying the device used to make a transaction is nearly as important as validating the user.

Geolocation

Tracing the buyer’s location can set-off fraud indicators if the individual is far from the cardholder’s billing address.

As we discussed, a pre-transactional tool can’t do much to impact post-transactional threats like friendly fraud. To see a real, significant decline in fraud losses—and your overall cost of doing business—you’ll need to consider these threats as well.

Chargebacks911® provides the most effective solutions for chargeback mitigation on the market. Our in-house travel industry experts are attuned to the needs of your business, whether that’s airline, OTA, or hotel bookings.

We deploy our proprietary Intelligent Source Detection® technology for chargeback management based on the dispute’s unique source. With ISD, we reduce all chargebacks to one of three fundamental sources—criminal fraud, friendly fraud, or merchant error—then deploy the right tools and strategies for each situation. The result: true, long-term chargeback reduction.

Managing travel industry payments is an expensive, time-consuming, and complicated process. With better fraud management, however, you could add millions of dollar in revenue to you bottom line this year. Find out how much you could save today.


Prevent Chargebacks.

Fight Fraud.

Recover Revenue.