The travel bug is increasing. And by ‘travel bug,’ we mean the strong desire to travel. This desire to travel is greatly fostered by Millennials who want to experience something new before settling down to a work routine. In short, there is a huge segment of Millennial travelers—and preceding generation are also making an impact in the travel industry.
In 2018, Millennials are estimated to spend about $6,800 on vacations and Gen Xers will spend $5,400. Baby Boomers are expected to take four or five leisure trips, spending almost $6,400 on travel expenses according to a national survey of adult travelers conducted by AARP.
While these are all great numbers, the problem is that the increase in spending, and spending in an ecommerce environment, can be a dangerous combination for travel merchants.
A High Risk Combination
In the world of disputes, travel and ecommerce transactions are both at risk for higher dispute rates and fraud. But there is a reason this combination came together. OTAs (Online Travel Agencies) are now a multi-billion dollar industry because they are a one-stop-shop for the best travel deals. These companies are a convenient way for cardholders to research the best deals for hotels, flights, excursions, and more. Unfortunately, OTAs are at risks for chargebacks.
There are two sides to this story. Let us first look at the ecommerce side.
The Ecommerce Side
The reason that ecommerce transactions are more susceptible to disputes is simple. It is the lack of in-person interaction. EMV chips were introduced to prevent card-present (CP) fraud, but that protection is not available for ecommerce transactions. The other advantage of in-person shopping, relative to ecommerce shopping, is the ability to see the product in-person. Moreover, cardholders will be able to feel and see the quality of their purchased product.
While the physical aspect won’t apply to travel transactions, the lack of in-person interaction will still be present. And that can create a variety of problems that could lead to a dispute. This includes problems such as a cardholder having a miscommunication during chat support, the cardholder not reading the fine print causing a no-show disputes, or doing improper research for their travel plans.
A ‘dispute-issuing’ environment like this can open the door for chargeback fraudsters and true fraudsters alike.
The Travel Side
This is a section from a Washington Post article directed at consumers. It tells them how to use the chargeback process to their advantage:
“Could disputing a credit-card charge solve your next travel problem?
For better or worse, travelers are turning to a last-ditch tactic to resolve their disagreements with airlines, car-rental companies or hotels: instigating credit-card disputes.
Chargebacks are on the rise in travel. A chargeback voids a credit-card transaction by withdrawing funds that were previously deposited into a merchant’s bank account and applying credit back to your card. Think of it as a way to reverse your charges. And even though experts caution against using this tactic because you don’t enjoy a vacation or disagree with an unfair policy, the odds are in your favor.”
Unfortunately, travelers are see that quote as a loophole to earn back their funds. Whether it is a legitimate reason to dispute a charge or just a way to get their money back, one thing is for certain: customers are disputing.
The travel industry’s dispute rate is more than twice the average of other industries. In fact, travel disputes from eCommerce transactions developed high chargeback values. Travel merchants end up losing, on average, $515 per ecommerce transaction. That is 33.2% more than what they are losing from card-present transactions.
The Travel Bug With Social Media
There is another factor that influences the travel bug, and that is travel content via social media. On recent survey found that 87% of Millennials on Facebook use the social media site for travel inspiration, while 20% use Twitter and Pinterest.
As we have been warned many times, what we see on social media is what only what the person posting wants us to see. But that may not stop your customers from expecting that social media ‘picture perfect’ experience. Travelers may want to visit a restaurant after seeing ‘foodie’ images on Instagram. They may even be convinced to go on a specific tour after seeing a their favorite travel blogger post in that location. But if the customer’s experience doesn’t live up to their expectations, they may dispute the charge in an attempt to get their money back. Their disappointment may have nothing to do with the services or product that you offered.
The following dispute reason codes may arise when cardholders make these claims:
|Card Network||Reason Code||Description|
|American Express||C31||Good or services not as described|
|Discover||RM||Cardholder disputes the quality of the goods or services|
|Visa||13.3||Not as described or defective merchandise or service|
The good news is that a dispute based on ‘another traveler’s social media post’ will not be credible for a chargeback. This is when your your company needs to provide a compelling chargeback response that disproves the cardholders claim.
Sticker Shock and Buyer’s Remorse
Travel merchants, whether they are OTAs or hoteliers, also face the risk of fraud reason codes. More specifically, the reason codes that claim the cardholder did not participate in the transaction. These reason codes include:
|Card Network||Reason Code||Description|
|American Express||F24||The cardholder denies participation in the charge submitted by the merchant|
|Discover||UA02||The cardholder claims that they did not approve or participate in a card-not-present card sale|
|MasterCard||4837||The cardholder states that they did not engaged in the transaction|
|MasterCard||4863||The cardholder claims that they do not recognize the transaction, and states that they did not authorize the charge to their credit card|
|Visa||10.4||The cardholder did not authorize or participate in a transaction conducted in a Card Not Present environment. OR a fraudulent transaction was completed in a CNP environment, using an account number for which no valid card was issued or is outstanding, and no authorization was obtained.|
The reason codes above may be used by cardholders who claim they did not participate in the transaction (even through they did authorize the purchase). This is called chargeback fraud. We have all probably been guilty of overspending while we are on vacation. For example, cardholders may look at their statement and feel buyers remorse after the trip is over. This will prompt them to commit chargeback fraud in order to earn their money back.
Is the Travel Bug Causing More Disputes?
As more people spend on travel, and turning to OTAs to do so, the disputes will keep coming. This is because ecommerce and travel transactions are notorious for having more consumer and fraud disputes. And with (some) travelers setting their expectations based on social media, the travel industry may face more disputes than ever. As these illegitimate disputes come in, it is important to be prepared to respond with the best possible evidence to protect your bottom line.