In this digital era, we’re used to booking our ticket, but often then have separate extras to consider, like choosing our seat, eating in-flight meals, holding luggage, among others.
In other words: the airline and travel sector has seen the death of the single transaction.
According to the International Air Transport Association, international tourists travelling by air are expected to spend over $750 billion this year, a rise of 15% in just over two years.
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Still, airlines are adapting to our digital-first society, but it’s brought with it one colossal consequence: a huge surge in costly transaction disputes, better known as chargebacks.
24/7 access to travel agents, airlines and hotels, enabled by apps and the internet, has helped change behavior.
Consumers are increasingly susceptible to temptation by purchasing trips online on a whim. Unfortunately, impulse bookings and the typically long time frame until redeeming the trip has an adverse effect on the travel industry.
When regret hits, impulse holiday-bookers will seek a refund. If they’re out of policy or T&Cs, they’ll need to contact their bank, bypassing the travel operators altogether.
Travel extras biting back
The problem of chargebacks isn’t new; the mechanism has been in place since the late-1950s to give customers greater protection from unauthorized transactions.
What is new, however, is the way the travel industry has transformed in this time.
Airlines, for example, are increasingly separating flights from the “extras” sold to customers. Most of these bookings no longer happen at the same time and often come through different channels.
Customers are famously fickle and like flexibility. When they change their mind on a purchase or detect a hint of disconnect in the booking system, they don’t really care what damage they cause so long as they get their money back.
Stefano Petrazzoli
As a result, the number of transactions airlines need to carry out has increased exponentially.
The problem today is that what were once single transactions are now up sixfold, coming from various channels and merchants.
This means airlines, for example, could face a 600% or higher increase in chargebacks, simply due to the way they sell their products.
Adding to the chaos, customers typically have more than two credit cards each, plus eWallets and new alternative payment methods - and they’re aware of the benefit of scattering payments across these methods.
Because of this, travel merchants are at higher risk of failing to link itinerary and ancillaries that were purchased at different times, through different platforms, with different payment methods.
New pricing models have been accepted by consumers, many of whom are happy to pay for extra comforts, or save money by choosing more basic arrangements.
Yet customers are famously fickle and like flexibility. When they change their mind on a purchase or detect a hint of disconnect in the booking system, they don’t really care what damage they cause so long as they get their money back.
Consumers are increasingly exploiting loopholes in this multi-channel approach, taking advantage of fragmentation in the industry and filing chargebacks to circumvent cancelation fees and non-refundable travel bookings.
In excess of six months after purchase, dependant on the future travel date, a consumer can raise a dispute with false claims - issues with the booking or unauthorised disputes being the most common.
Customers have plenty of time to change their mind on a booking that they’ve made - and no insurance is necessary to try to get a refund through this method.
Forewarned is forearmed
So, can travel operators prevent customers using chargebacks as a refund mechanism?
It may look difficult for merchants to manage the risk without ruining customer relationships or having to blacklist potentially loyal customers because of one contentious dispute.
Bear in mind that consumers who lie about their disputes may not know that the problem they’re causing. The key is to provide an experience that protects revenue while preserving a positive customer experience.
One false claim shouldn’t mean a lifetime blacklisting. In addition to losing a potential returning customer, travel companies also risk sending them directly to a competitor.
Understanding what causes your chargebacks and the rights you have concerning wrongfully filed claims, is the key to managing this growing statistic.
About the author...
Stefano Petrazzoli is director of travel relations at
Chargebacks911.