How the Peak Travel Season Will Impact Payment Fraud

Summer is just around the corner, and with it comes an influx of vacationers ready to explore new destinations. As the summer travel season begins, businesses operating within travel and hospitality must adopt robust strategies to manage the anticipated increase in transaction volumes and fraud risks. These strategies must also effectively manage disputes and chargebacks during a peak travel period that’s expected to break records.

Americans are still choosing to prioritize their vacations despite challenges like international unrest and rising prices. Projections from the Transportation Security Administration (TSA) suggest we’ll see a record-breaking summer travel season in 2024, with officials anticipating the busiest travel season ever.

52% of consumers say they plan to travel as much in 2024 as last year, with another 40% saying they expect to travel even more. These prospective travelers already have significant budgets set aside for these trips.

Millennials and Gen Z are the driving forces behind this trend. People in this cohort tend to prioritize experiences over material goods and seek a healthy work-life balance to explore new places and cultures. They’re also heavily influenced by social media, where many influencers showcase travel as part of an aspirational lifestyle.

This surge in travel drives global business at every level of the economy, but it also creates a heightened sense of risk. For businesses, effectively managing fraud and chargeback risk year-round is crucial to navigating the travel space.

Let’s explore the best strategies and tactics for managing these threats, whether in-house, hybrid or outsourced, and why asking for help might be the most effective course of action this year.

Related: How a Bad Billing Descriptor Can Cost You

The challenges ahead

While a travel boom is fantastic for businesses and local economies, it poses significant challenges that underscore the necessity of comprehensive fraud and chargeback management. An exceptionally busy travel season can aggravate existing chargeback triggers already intrinsic to the travel space. We may see:

1. Increased Transaction Volume. The sheer volume of transactions during peak travel seasons makes managing and monitoring every transaction closely difficult. This increased volume can overwhelm internal systems, leading to errors and delays in handling disputes, contributing to more chargebacks.
2. Fraudulent Activities. Fraudsters take advantage of the busy season, knowing that the high transaction volumes can mask their activities. From fake travel deals to phishing emails, the types of fraud targeting travelers are diverse and sophisticated, increasing the likelihood of chargebacks from unauthorized transactions.
3. Overbooked Flights and Hotel Shortages. High demand can lead to overbooked flights and sold-out hotels. When travelers are bumped from flights or denied rooms, dissatisfaction spikes. So, too, does the number of chargebacks as customers dispute charges for services they didn’t receive.
4. Poor Customer Service. Understaffing is common during peak periods, resulting in longer wait times, unresolved complaints and poor service. Frustrated customers often turn to chargebacks to resolve their grievances when they feel neglected or mistreated.
5. Operational Strain. Handling a surge in transactions requires a well-prepared operational setup. Without it, companies might fail to process payments and refunds promptly, further aggravating customers and leading to more disputes and chargebacks.
6. Financial and Reputational Impact. Chargebacks result in financial losses due to refunds and fees. However, they also damage a company’s reputation with customers and hurt their relationships with financial institutions. High chargeback rates can result in higher processing fees and, in severe cases, the loss of merchant processing privileges.

Considering what’s at stake, you can see why it’s incredibly urgent to prioritize effective chargeback management. Aside from saving time and money, it can also help boost customer trust during the peak travel season.

Managing chargebacks: In-house, hybrid or outsourced?

Travel operators can adopt one of three chargeback management strategies to handle the increased demand and the potential challenges outlined above.

First, they can manage everything in-house. This involves maintaining a dedicated team to manage disputes, enhance customer support and refine fraud detection systems. While this approach offers direct control, it can be resource-intensive and requires constant updates and training to stay updated on new fraud tactics and regulatory changes.

A second option is to outsource everything. This allows travel companies to benefit from specialized expertise and advanced technologies without the burden of maintaining an in-house team. Third-party providers can offer scalable solutions, real-time fraud detection and comprehensive chargeback prevention strategies. However, it can also mean that merchants lack insight.

As a third option, merchants can try taking a more hybrid approach. Combining internal efforts with external support lets businesses leverage advanced technologies and knowledge from third-party providers while retaining some control over the process. This approach provides a balance between direct oversight and external expertise.

Related: How to Fight Fraud and Chargebacks Should Regulation Fail

Industry collaboration

As we gear up for a record-setting summer, it’s clear that improved industry collaboration could be the key to addressing fraud and chargebacks.

We could consider the transformative potential of open data and artificial intelligence (AI) within the tourism industry. Combining an open data strategy with AI can enhance decision-making processes, helping to personalize customer experiences and optimize operations.

By harnessing open data, businesses can gain valuable insights into traveler preferences and behaviors. This insight can be refined using AI to forecast trends and tailor services.

Related: Think You Can’t Win Against Chargebacks? Think Again.

Open data and AI will have a much more symbiotic relationship in the future. The kind of collective effort that open data demands will create a more secure environment for our customers and protect our businesses from the financial strain of chargebacks. These technologies promise to boost efficiency and innovation in tourism, help manage threats and enhance the overall travel experience.

Ultimately, travel operators need to be proactive. By adopting the right strategies and fostering collaboration across the industry, operators can thrive during this busy travel season and create a better experience for all travelers.