Fraudulent Chargebacks Could Be Growing Problem in Travel

The travel sector, which is just beginning to turn the corner as the pandemic subsides, could suffer a blow due to fraudulent chargebacks.

A new report from Chargebacks911, a company that focuses on mitigating chargeback risk and eliminating chargeback fraud, found that a chargeback reversal rate of just 10 percent could put travel merchants out of business.

“The whole industry is acutely aware of the pressure it has been under over the last two years," said Christopher Staab, co-founder of Airline Information. "However, there are clear and encouraging signs that the sector will experience not only a resumption of normal business, but a surge of consumers desperate to explore the world once again. This is why we welcome this research from Chargebacks911 and encourage airline and travel merchants to continue to be proactive and remain vigilant in striving to keep fraud and chargebacks in check.”

Chargebacks911 and Airline Information noted that vigilance is critical to counter fraud, especially at this critical moment.

“The travel industry has suffered the most devastating economic impact from the pandemic," said Monica Eaton-Cardone, COO and co-founder of Chargebacks911. It continues to lose revenue; refunds are requested on a massive scale and the ever-rising numbers of chargebacks spell the collapse of several travel providers worldwide. There’s been a clear structural change in chargebacks after COVID-19. Travel is getting back to a new normal, and chargeback activity will follow suit. We're seeing a surge of travel-related chargebacks, foreshadowing another round of ‘dispute contagion’–a clear indicator of growing behavior trends. Merchants can’t afford to ignore this problem.”

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Many merchants within the industry would like more regulation of chargebacks. Sixty-two percent of respondents want greater industry collaboration, including integrated technology systems and data sharing, to help identify evolving fraud and chargeback methods. The survey showed that very few merchants could effectively identify friendly fraud due to lack of resources and expertise.

“One of the reasons for the growing number of chargebacks is the lack of defense against friendly fraud," said Eaton-Cardone. "Once committed, most merchants don't realize that if they let it go, they’re admitting fault–and inadvertently rewarding the wrong behavior.

Eaton-Cardone also warned that those who do get away with the fraud are likely to do it again.

We're seeing lots of very creative avenues for fraud and chargebacks being exploited. Merchants must be on their toes. It all comes down to knowing your customer and having access to more data to be able to identify suspect behavioral trends,” she said.

Something else travel merchants should watch out for is "double-dipping." This occurs when a customer asks the company and the credit card company for a refund.

Chargebacks911's research found that 60 percent of respondents saw an increase in double refund rates since the pandemic began.

Technology can help as can companies like Chargebacks911.

“Any merchant should focus on their core competencies, like improving the customer experience, and paying attention to customer service," said Eaton-Cardone. "I would challenge merchants to look at how they can make smarter decisions and recognize the technologies available to assist them. That way, everybody wins."