The travel industry is one of the largest industries in the world as it accounts for just over 10 percent of the global GDP. This industry employs more than 300 million people worldwide and millions of people travel each year for a number of reasons. In fact, the growth of the travel industry around the world always outpaces the growth of the world economy.
The COVID-19 pandemic may have slowed down travel for a period of time, but the lifting of restrictions has returned travel to pre-pandemic levels. People that had been unable to travel during the pandemic are eager to travel which bodes well for the travel industry.
Many of the transactions within the travel industry are done with electronic payments, including buying airline tickets, booking hotel rooms and rental cars, and paying for the services of a travel agent. This makes it very important for businesses within the travel industry to have a merchant account with a trusted professional. However, the travel industry is considered a high-risk industry and traditional banks and payment processors typically avoid working with businesses in this industry. Travel businesses need to find a trusted payment processor that has experience working with high-risk businesses, including those in the travel industry.
This guide explains why travel industry businesses are considered high-risk as well as how businesses in this industry can secure safe and reliable merchant account services. First MCS provides merchant services for businesses with hard to place merchant accounts, including the travel industry, in the Chicago, IL area.
Why is the Travel Industry Considered High-Risk?
Despite making up a major part of the global GDP, the travel industry is considered high-risk to traditional banks and payment processors. The biggest reason is that travel businesses are susceptible to fraud and chargebacks. An estimated $25 billion is lost each year by the travel industry due to fraud and chargebacks which makes it important for travel businesses to manage these risks.
Traditional merchant services providers generally do not work with businesses vulnerable to chargebacks. This is why businesses in the travel industry must find a merchant services provider that is willing to work with high-risk accounts.
The following are the main reasons that travel businesses are considered high-risk:
- Chargebacks: Chargebacks occur in the travel industry when someone pays for an airline ticket, hotel, or the services of a travel agency and then cancels their plans. They will usually go to their credit card or bank for the refund which results in a chargeback for the businesses they paid. The high risk of chargebacks coupled with the fact that most transactions are high ticket sales is the main reason the travel industry is considered high risk.
- High ticket sales: The cost of traveling adds up fast as travelers pay for airline tickets, hotels, car rentals, tours, and services from a travel agency. Each one of these transactions tends to be a high-ticket transaction which makes the high-risk of chargebacks a major problem for traditional merchant service providers.
- Advance purchase: People usually plan and book their trips months in advance which gives them a lot of time to cancel their plans and request a chargeback before their travel date. It is common for people to cancel travel plans due to a change in plans or buyer’s remorse.
- Fraud: There is a high risk of fraud in the travel industry because of the amount of personal information customers must provide and big-ticket transactions. Fraudsters target big-ticket transactions made with credit cards which is why fraud is such a major concern in the travel industry.
How to Get a Merchant Account for Your Travel Business
Even though travel businesses are considered high-risk, they can still get merchant account services from professionals like First MCS who specialized in working with businesses with hard to place merchant accounts. You can make it easier to secure a merchant account for your travel business by taking the following actions:
- Establish stable financial record: It is important for travel businesses to show that they have a strong, consistent financial track record. Make sure you have at least several months of financial records to show merchant service providers that your business can reliably process card and electronic payments and maintain the growth of your business.
- Trade association membership: Travel and tourism-based businesses should show proof of their membership in a trade association such as the U.S. Travel Association, The American Society of Travel Agents, the United States Tour Operators Association, and the Association of Retail Travel Agents to name a few. A trade association membership shows merchant service providers that your business has some level of prestige in your niche in the industry.
- Take action against chargebacks and fraud: Businesses in the travel industry can take actions to help manage and reduce instances of chargebacks and fraud. Travel businesses can use various tools to help fight fraud by better managing transactions and get chargeback mitigation services that alert you when a customer disputes a transaction so you can contact them for a refund to avoid a chargeback. When looking for a merchant service provider, make sure you are transparent about your history of chargebacks and the actions you are taking to help reduce them.
What to Look for with Merchant Account Services
Businesses in the travel industry must work with a merchant account service provider that can be trusted to provide secure and effective payment processing along with protection against fraud and chargebacks. You should look for the following in a merchant services provider:
- Chargeback and fraud protection: Travel businesses are responsible for putting a plan in place to help reduce instances of fraud and chargebacks, but merchant service providers should also include chargeback and fraud protection in their services. Make sure you work with a payment processor that offers these protections for your account.
- Effective payment processing solutions: The majority of transactions in the travel industry take place online which makes it important to work with a payment processor that can provide effective, integrated solutions. Payment gateways and application programming interfaces (APIs) can be integrated into the existing payment processing infrastructure of a business to make payment processing easy and secure. These payment processing solutions are more likely to accommodate the needs of your business than a one-size-fits-all solution.
- International merchant accounts: Businesses in the travel industry must be able to process domestic and international payments. Look for a merchant service provider that can accommodate international payment processing and integrate it with domestic payment processing into one solution.
Hard to Place Merchant Account Services from First MCS
Now that many of the travel restrictions from the COVID-19 pandemic have been removed, it appears that the travel industry will continue to be a major industry as people worldwide are once again able to travel freely. Businesses within the travel industry must turn to a payment processor like First MCS that can provide them with safe and reliable merchant account services.
At First MCS, we provide hard to place merchant account services for businesses in high-risk industries and we have experience working with travel businesses. We will provide merchant services that include point of sale (POS) systems and payment processing solutions that are PCI compliant with built-in fraud protection. We also offer 24/7 customer support to help resolve your issues as quickly as possible.
You can call First MCS at (866) 673-3099 for more about our hard to place merchant account services for businesses in the travel industry.