Creating preventive measures to stop disputes and setting up your operations to have the correct evidence when disputes happen will protect your hotel’s bottom line.
In a recent article, we went over what types of fraud hotel merchant's faced. These fraud types ranged from fraudsters test cards to chargeback fraudsters taking advantage of the dispute process. While merchants need to be aware of the types of fraud they may face, it is even more vital to take steps to prevent fraud. American Express put together a checklist to help hospitality merchants handle and avoid disputes. We will take a look at their suggestions and dive a little deeper into their tips and tricks.
The Types of Dispute Fraud
There are three types of dispute fraud that hospitality merchants face:
Chargeback Fraud - is when a cardholder is maliciously using the dispute process to try and regain the transaction amount back. For example, a customer receives everything that was promised by the hospitality merchant but dispute transaction anyway just to get their money back.
Friendly Fraud - is when a cardholder disputes a charge that they actually authorized. They are disputing the transaction because of a misunderstanding or simple forgetfulness. For example, a hotel's merchant descriptor is the name of the parent company, not the actual hotel's name. So, the cardholder doesn't recognize the charge and disputes the transaction.
True Fraud - is when a fraudster gets a hold of credit card credentials, and the merchant accepts the purchase. This results in the cardholder disputing the fraudulent charge, and the merchant receiving a dispute.
Now that we have the basics of what kind of dispute fraud hospitality merchants face let's look at how to prevent it.
Fraud Preventing Reservations
When the cardholder is booking, be upfront with all of your rates, fees, and policies. By communicating all the needed information upfront, it can help prevent disgruntled customers from disputing the entire hotel stay because they received an unexpected fee. It also maintains customer relationships, which can turn into future purchases.
Communication with the customer is also crucial. Sending the customer a confirmation email with the data of their stay, cost, and any other information they may need to know about their stay prevents future disputes. For example, a customer may have got a price of their stay mixed up in their head. When the charge hits their account, they can refer back to their confirmation email to see that it was indeed the correct price.
When the customer makes a reservation, this is the time to gather all the needed information to validate that the person making the transaction is the true cardholder. The collected data should include routine fraud check to make sure the transaction is not true fraud. This is also the time to gather information needed to validate the cardholder at check-in.
Fraud Preventing Check-Ins
When the guest arrives to check-in, hospitality merchant's should check that the name of the room and the reservation match the name on the card being used. If the cardholder's credit card has been lost or stolen, American Express requires the merchants to "call your Merchant Services Provider, request "Authorization for an Emergency Check-in," and follow the instructions." This procedure is necessary because Amex offers emergency benefits to its cardholders. One of those benefits is an emergency check-in which still allows the cardholder to check-into the hotel and charge their stay to their Amex card without having the physical card with them.
After the cardholder's name is verified, the next step for merchants is to have the cardholder sign a registration document. The document should state the rate, the length of stay, and any other information that the merchant feels necessary. This process helps communicate one more time to the cardholder what they are purchasing and at what cost.
Lastly, the authorization of the credit card. For American Express credit cards merchants should follow these procedures:
- At check-in, determine the estimated cost based on room rates, length of stay, taxes, and any other costs. Be careful not to overestimate the request.
- Merchant must inform the cardholder the estimated cost of the authorization before initiating the request.
- Obtain the authorization request which remains valid for the duration of the stay.
Fraud Preventing Check Out
After the cardholder's stay, there are a couple American Express requirement hospitality merchant need to be aware of. The first is if the cost of the stay comes to more than 15% above the original authorization amount, merchants will need to reauthorize.
American Express states that "the card cannot be used to bill damages, losses, penalties or fines." The American Express merchant agreement has merchants get the cardholder to sign a separate charge for the damages and must submit it as a separate transaction. So, merchants need to charge courtesy fees at check-in.
Preparation Helps in the Long Run
Setting up dispute best practices may seem daunting to merchants. But the effort pays off in the long run to the prevention of unnecessary disputes. Which means less revenue loss, a smaller amount of time spent crafting dispute response documents, and a drop in the cost of disputes fees. Overall, creating preventive measures to stop disputes and setting up your operations to have the correct evidence when disputes happen will protect your hotel's bottom line.