A report on chargeback challenges for travel merchants published by fraud prevention technology vendor Riskified in the middle of last year noted that travel merchants have one of the highest chargeback rates of any industry.
The report authors observed there are various factors behind this, including higher instances of card-not-present transactions, trip cancellations or disruptions, dissatisfaction with the quality of the travel experience and service not delivered.
In some cases consumers will be the victims of fraud. However, the report also states many consumers continue to use the chargeback habits they learned during the pandemic to receive compensation, sometimes under false pretences.
An earlier survey by travel payments provider Outpayce found the majority of travel merchant customers believed chargebacks were easier than getting a refund and that almost half found it easy to raise a chargeback through a mobile banking app.
Chargeback management is complicated by the fact that most travel merchants work with multiple payment service providers and acquirers, meaning they have to access and correlate information from various disconnected systems.
Because it can be more costly to dispute fraudulent claims than to simply accept them, more than two-thirds (69%) of the merchants surveyed for the report, refund disputes to avoid chargebacks despite acknowledging that a significant percentage of such claims are first party fraud.
Three-quarters reported a year-on-year increase in chargebacks and a similar proportion recovered less than half of all claims.
The merchants referred to a number of options for managing disputes more efficiently, ranging from increased automation and platform consolidation to better data management and reporting abilities.
Online travel agency Booking.com decided to work with a fraud prevention technology specialist to boost its approval rates and minimise fraud costs.
Andreas Zodhiates, Head of Payment Fraud says the company’s fraud strategy is threefold. “Firstly, stopping as many bad transactions as possible at the pre-authorisation stage,” he says. “Secondly, detection of what is still getting through and addressing that in real-time in terms of business rules and adjustments to the models. Thirdly, how to cancel and refund transactions as quickly as possible to maximise recovery.”
Before Booking.com started working with Riskified it was focused on scaling up its payments business model but did not have all the historical data it needed to build the right solution explains Pascal Mafait, Senior Director of Fraud. “We are a data-driven company and that means that data is going to really help us to determine what to prioritise.”
When the company considers any new vendor or supplier relationship, the starting point is the return on investment.
“When I look at the benefits of working with Riskified, first off has been increasing our approval rates – getting good customers over the line,” says Zodhiates. “When we launch new products or offerings and don’t have sufficient in-house data, we can leverage their network.”
Mafait agrees that the partnership has had a positive impact on the business. “Because of the integration that we have we are more comfortable, for example, moving into a new market or new vertical with a new product that we do not necessarily have a lot of experience or historical data for,” he says. “The collaboration really keeps us on our toes. We have been sharing insights in terms of how to optimise machine learning models, such as what features we need to look at.”
