Perceived difficulties in obtaining refunds and increasing traveler awareness of ‘chargebacks’ driving 30% year-over-year growth
A recent study conducted by Outpayce has shed light on the significant rise in chargebacks faced by travel companies, signaling a growing concern within the industry. With difficulties in obtaining refunds and increasing traveler awareness of the chargeback process, the study reveals that chargebacks have experienced a staggering 30% year-over-year growth. These findings raise important questions about the ability of travel companies to effectively contest chargebacks, as the majority struggle to gather the necessary evidence. The study also highlights the need for improved chargeback management strategies within the travel industry.
Carried out during March and April 2023, the survey was completed by 46 senior leaders from airlines and travel agents with responsibility for chargeback management. Over 50% of the respondents were from large travel companies with >€500m in annual revenues.
What is a chargeback?
Cardholders have the right to dispute a transaction by raising a ‘chargeback’ via the bank that issued their card. When this happens a standard dispute process is initiated, and the travel company has a certain amount of time to collate the evidence needed to contest the chargeback. If the travel merchant is unable to provide the required evidence in a timely manner, the funds are automatically returned to the cardholder.
Anecdotal stories from travelers have long suggested an increase in chargebacks within the travel sector, especially following the disruptions caused by the pandemic. The Outpayce study substantiates these claims, revealing that 71% of travel companies have indeed witnessed a surge in chargebacks in recent years. Factors contributing to this rapid growth include the perception among travelers that chargebacks are easier to obtain than refunds (62%), increased awareness of the chargeback process (56%), and the convenience of raising a chargeback through mobile banking apps (42%).
The struggle to contest chargebacks
The study also sheds light on the significant challenge faced by travel companies when contesting chargebacks. Only 25% of firms experience a success rate exceeding 60% when challenging disputes, while nearly half of the surveyed companies witness less than 40% of contested chargebacks awarded in their favor.
This low success rate underscores the need for travel companies to reevaluate their approach to chargeback management and invest in additional resources.
Addressing the challenges
Tania Platt, Senior Vice President, Commercial, Outpayce from Amadeus, expressed her concerns based on the research findings. She emphasized the difficulties faced by travel companies in handling the escalating volume of disputes. The requirement to invest in skilled resources, coupled with the challenge of collecting essential travel and payment information necessary for contesting chargebacks, has contributed to the industry’s low success rates. Platt suggests that the travel industry should take a step back and consider adopting an industrialized approach to chargeback management.
Platt further explained that airlines, for example, possess crucial transactional information throughout the entire process, such as cardholder authentication, payment authorization, presentation of terms and conditions, and passenger boarding status.
The main hurdle lies in collating this information promptly to effectively challenge chargebacks when the travel merchant is not at fault. Over the past few months, Outpayce has been actively working to solve this problem by focusing on streamlining the process of collecting and providing relevant information.
Enhancing efficiency through Information Provision
The study also revealed that over two-thirds of respondents agreed that receiving key travel and payments information promptly, such as proof of payment authorization and proof of passenger boarding, would significantly enhance their firm’s efficiency in managing chargebacks. This highlights the need for improved information-sharing practices within the travel industry to better equip travel companies in dealing with chargebacks effectively.
The surge in chargebacks faced by travel companies presents a pressing challenge for the industry. As travelers increasingly perceive chargebacks as a more accessible solution than seeking refunds, the need for efficient chargeback management becomes paramount. With a majority of travel companies struggling to contest chargebacks and low success rates in dispute resolution, it is evident that the industry must adopt new strategies to address this issue. Improved collation and provision of travel and payment information, along with an industrialized approach to chargeback management, offer potential solutions for travel companies seeking to mitigate these challenges effectively.
