Payment Processing For The Travel Industry: How to Find the Right Merchant Account For Your Travel Business

The past few years have been difficult for the travel industry. Competition is stronger than ever, and travel agents must now contend with the rising force of online platforms that account for 82% of all bookings.

Before lockdown measures came into effect, UK travel agents took over 25 million credit card payments each year despite 45% of travellers becoming comfortable with researching and making their own bookings using their mobile phone.

It goes without saying that agencies must accept card payments to succeed in today’s market. Card processing capabilities can help firms retain old customers and attract new ones, but it can be hard to get approved for a travel company merchant account. Trust between banks and travel businesses hit an all-time low during 2020 and the sector is now considered high-risk.

In this guide, we explore the high risk merchant accounts for travel anegcy and explain how Merchant Savvy could help you to successfully apply for a high-risk merchant account.

Why Are Travel Agents Classed as ‘High-Risk’ Businesses?

Merchant service providers view payment processing for travel industry as a high-risk activity. They typically point to historical issues with fraud and chargebacks to justify this, but there are other factors that explain why travel payments are viewed as such:

• Long lead times between booking and travel: Statistics show that the majority of UK holidays are booked between four and 12 months in advance, leaving plenty of time for costly cancellations.
• High-value transactions and international involvement: Fraud and money laundering are major concerns within the industry, with high value transactions involving multiple international currencies, payors and payees.
• High numbers of chargebacks and fraudulent claims: In addition to legitimate chargebacks, some travellers cover the costs of their expenses by issuing fraudulent claims.
• Delayed payments from agency deals and “buy now, pay later” providers: High-value payments are often postponed or stretched out over long periods of time to accommodate financing deals and “buy now, pay later” offers which introduces an additional layer of complexity to processing travel payments.
• High risk of bankruptcy and business failure: The COVID-19 pandemic grounded flights, closed airports, and almost halted global travel. Agencies are faced with a difficult financial situation, and payment processors are mindful of the bankruptcy and credit risk they pose.

High-risk merchant accounts are typically subject to more chargebacks and refunds, and some account providers are reluctant to provide their services to firms that fall into this category.

These accounts are usually characterised by higher fees, longer settlement periods, and even requirements to maintain a ‘rolling reserve’ of funds to cover the potential costs of chargebacks.

Not all merchant acquirers are suitable for travel agents and other high-risk businesses, so it’s worth learning about your options before making a decision.

What is a High-Risk Merchant Account?

High-risk merchant accounts are payment processing accounts that banks offer to businesses they consider to be risky.

High-risk businesses are typically subject to more chargebacks and refunds, and some account providers are reluctant to provide their services to firms that fall into this category.

These accounts are usually characterised by higher fees, longer settlement periods, and even requirements to maintain a ‘rolling reserve’ of funds to cover the potential costs of chargebacks. Not all merchant acquirers are suitable for travel agents and other high-risk businesses, so it’s worth learning about your options before making a decision.

To find out more, visit our high-risk merchant account page.

How to Choose the Best Merchant Account for Your Travel Agency

While the industry is considered ‘high-risk’, many merchant acquirers (the banks that handle the processing of card payments on behalf of businesses) are still willing to work with travel firms.

There are several key features to look out for when trying to find the best high risk merchant account for travel business:

• A safe and secure transaction environment for your business and customers
• The ability to accept a wide variety of payment options and foreign currencies
• A low fees structure that makes financial sense for your business
• Compatibility with your existing payment gateway
• Flexible contract options and payment plans
• Commitment to customer safety and strong support systems

In addition to these key features, it’s also essential to work with a merchant acquirer or payment service provider that has experience with the travel industry and understands the unique challenges it faces.

How to Apply for a Travel Agency Merchant Account

Each merchant service provider has their own eligibility requirements and application process, but there are some things you can do to improve your chances of getting approved for a high-risk account.

1. Keep Your Accounts in Good Order

Keeping your accounts up-to-date and in order will make it easier to provide supporting information for your application. Any providers of payment processing for travel agents will want to establish that your business is financially sound, and good bookkeeping can help them to do that.

2. Stay Compliant With Relevant Regulations

Ensuring that your legal policies, terms and conditions are compliant can prove to banks that your business will not be troublesome. Chargebacks and other issues are more likely to arise when a business doesn’t have a tight set of rules governing the purchase of its products and services. Having effective policies in place could minimise future financial problems.

3. Review Your Supply Chain

Third-party suppliers and partnerships are an important aspect of the travel industry, so it’s important to review your supply chain when applying for a high-risk merchant account. Ensuring that any contracts protect your business from financial harm can go a long way.

4. Control Chargebacks Carefully

Imposing the right checks and balances to minimise chargebacks can significantly improve your chances of getting approved for a merchant account. Fraud filters, well-formatted statement descriptions, and a rapid refund system could all help you to avoid chargebacks and satisfy payment services providers.

5. Consider Off-Shore Merchant Account Providers

It’s worth exploring all your options when applying for a high-risk merchant account. You shouldn’t write off off-shore merchant account providers that may be able to offer competitive rates and terms.

What are Chargebacks in the Travel Industry?

Chargebacks are one of main causes for trust issues between banks and the travel industry, but they are widely misunderstood.

In simple terms, a chargeback occurs when a customer requests that their card provider returns the funds from a transaction as a result of a dispute or when their bank suspects there is an issue.

They can be damaging for businesses since they impact cash flow, cut into the bottom line, and often come with additional fees attached.

Legitimate chargebacks do happen, but the travel industry is also affected by chargeback fraud. This is when customers claim for a refund with their card issuer without a valid justification.

Cancellations due to the pandemic and for other reasons are also a major issue, since some customers seek a chargeback rather than waiting for their travel provider to issue a refund.

How a High-Risk Merchant Account Provider For Travel Agencies Can Help

Thankfully, there are steps that travel agency businesses can take against the risk of chargebacks.

Clear policies, detailed receipts, mandatory insurance for customers, and open communication with travelers can all help prevent payment disputes. Similarly, requesting payment by bank transfer could help you avoid the issue altogether.

Beyond these practical steps, some of the best physical and online travel agency payment processing providers offer integrated chargeback prevention tools as part of their service.

These are automated systems that merchant acquirers use to identify fraudulent disputes and prevent businesses from suffering the financial consequences of chargebacks.

What to Do If Your Acquiring Bank Terminates Your Travel Agency Merchant Account

Acquiring banks frequently review their portfolio of client businesses to identify and limit their exposure to risk. This means that travel agents sometimes have their merchant accounts terminated – often without much warning.

It’s always advisable to have a backup plan in place to prevent your business from being impacted negatively by sudden account termination. This could mean working with several travel company merchant account providers at once.

Finding, cultivating, and managing relationships with merchant acquirers can be difficult, which is why so many travel agents seek the help of expert advisers such as Merchant Savvy.

Our team is on hand to assist travel businesses whose merchant accounts have been terminated – so please get in touch for help, support, and advice.

Find the Best High-Risk Merchant Account for Your Travel Agency

We specialize in securing merchant accounts and payment solutions at competitive rates for many types of travel companies including high street and/or online travel agencies, chartered jet providers, airline booking specialists etc.

If you’re struggling to find the right high-risk merchant account for your business or have had your existing account terminated, get in touch with us for some impartial advice and quotes.