If you are preparing to launch a travel-related business or have already done so, you are likely aware that traditional banks and other mainstream financial institutions consider travel businesses to be high risk. This means that one of the challenges you face is opening a merchant account and obtaining payment processing services. All businesses benefit from optimal use of their merchant accounts and high-quality payment processing, but finding the right provider of a merchant account for travel can take the benefit to the next level for your high-risk business.
The two most common reasons that a business is considered to be high risk are that it is in an industry that has a high rate of chargebacks and that it is particularly susceptible to fraud. Chargebacks and fraud are both more likely to occur when the prices of products and services are high. Transactions at a travel business are more likely to involve payments of $1,000 than a payment of only $10.00. Travel-related business now involves online transactions as a normal part of the system. Along with the many conveniences of online transactions, the reality is that it also creates more opportunities for fraud.
In the travel industry, chargebacks are typically due to a customer changing his or her mind or because of a change in circumstances that prevents the trip. A factor unique to travel-related businesses is the extended period of time between the day that travel plans are made and the actual day of the trip. If the total cost of the trip is, say, $3,000, a wait of two or three months could very well result in a waning of your initial excitement, and you may start thinking that you should have bought a new refrigerator instead.
The consequences of fraud and a high rate of chargebacks cost the merchant and the bank a lot of money. Banks are very reluctant to take on that risk. This makes it very difficult for travel agencies, etc., to open a merchant account at traditional banks. That does not, however, change the fact that your travel-related business has to have a way for customers to pay with credit cards/debit cards.
There are, of course, some things that you can do. You can implement measures to reduce or eliminate risks, such as making return policies clear and easy to understand, providing high-quality customer service, maintaining good communication with customers, and providing refunds before customers initiate chargebacks.
Giving customers more time to make a decision about the purchase may sometimes result in a decision not to make the purchase. However, a decision made in haste or on impulse is significantly more likely to result in a chargeback and the accompanying extra cost than one that is made after more thought. Travel plans are often made far in advance, possibly months before the actual trip. That gives the customer a lot of time to develop buyer’s remorse and initiate a chargeback.
In addition, a reasonable and clear refund policy will help your case in a dispute, and it will also increase the likelihood that the customer will contact you to resolve the issue instead of going directly to the bank to initiate a chargeback. A positive experience with your business providing a refund when appropriate could bring the customer back to you in the future to make a purchase that he or she is more sure of.
Clear and attentive communication can also help prevent fraud. Fraudsters thrive on anonymity and ambiguity. Spelling out terms, conditions, deadlines, requirements, etc., clearly can eliminate opportunities for fraudsters and make it more risky to attempt a scam. Criminals shy away from risk and difficulty, and prefer the safest and easiest path, and will often abandon their plans if it seems like too much of a bother and too much of a risk.
This won’t necessarily change the fact that your business is considered to be high risk, and you will need to find an alternative to traditional banks and many popular payment processors. Obviously, the payment processor you select should be able to provide your customers with a payment portal and handle the standard aspects of payment processing. It should also have the equipment, software, experience, and expertise to handle the factors and challenges that are unique to the travel industry. It must be able to provide uninterrupted and accurate credit card payment processing despite the challenges.
Your relationship with your payment processor will be a partnership, and your honesty about your circumstances and needs is vital to enabling the processor to provide the services that you need.
You may be able to find a traditional bank, etc., that is willing to provide your business with a merchant account, but it will still view your business as high risk. You will be subject to stricter requirements, lower maximum chargeback rates, and other conditions that could result in your merchant account being closed suddenly, leaving you with no way to get paid by customers. Your travel business might benefit from using a high-risk payment processor from the start.
There are various additional benefits to utilizing a high-risk payment processor. For example, high-risk merchant accounts for travel-related businesses usually do not utilize purchase price caps, which can make it difficult for customers to make purchases. In addition, high-risk payment processors consider chargebacks to be a given due to the nature of the travel industry. This means that they have a much higher tolerance for chargebacks, significantly reducing the possibility that your account will be closed suddenly, without warning. A good payment processor will have the knowledge and experience needed to help you reduce chargebacks, and some payment processors provide chargeback management services to fight chargebacks that you believe are illegitimate.
Not every business that asks a high-risk payment processor for a merchant account and payment processing services, of course, but because such firms specialize in high-risk industries, it will probably be much easier not only to open a merchant account, but also to keep it in good standing.
A high-risk payment processor such as Zen Payments specializes in payment processing for high-risk industries, and understands the payment processing needs and challenges of the travel industry. We have the experience and expertise necessary not only to get you a merchant account, but also to make the payment process easier for your customers and for you.
When choosing a high-risk payment processor, be sure to ask as many questions as necessary until you’re satisfied with the responses and clear on what you can expect and what will be expected of you. Our team at Zen Payments would be happy to speak with you and find ways to help your business prosper, so please don’t hesitate to contact us.