Consumer Fraud Could Hamper Booming Global Tourism Industry
The global travel and tourism sector, which was valued at $8.8 trillion in 2018(1), is expected to grow at a year-on-year rate of 3.9%, reaching $11.4 trillion by 2025.(2) Chargebacks911, a dispute mitigation and loss prevention firm, notes that a spike in online fraud could reduce both the industry's margins and its overall growth rate.
As evidenced by the collapse of Thomas Cook in September of 2019, which impacted an estimated 600,000 travelers all over the world(3), the travel industry is experiencing turbulence—and is inherently risky. For this reason, travel merchants are normally required to work with a high-risk processor to accept credit card payments. Such processors typically charge above-average fees while demanding strict contract conditions. They also require high-risk merchants to maintain a merchant account reserve against a sudden spike in chargebacks, such as those precipitated by the Thomas Cook debacle.
"Even in an era of record-breaking revenue, the travel industry is fighting expenses that threaten its margins," says Monica Eaton-Cardone, co-founder and chief operating officer (COO) of Chargebacks911. "Fuel costs are rising, as are labor costs, and real estate continues to be more and more expensive."
One of the biggest threats to industry profitability, however, is chargebacks, Eaton-Cardone adds—and the rate of chargebacks is increasing by at least 20% per year. Meanwhile, the airline industry is losing $2.8 billion per year to card-not-present fraud.(4) Reducing exposure to chargebacks—not just for airlines but for the entire travel sector—could be the quickest available way to reduce operating costs and help protect margins.
Chargebacks911 recommends a multilayer fraud solution composed of both pre- and post-transaction elements. Pre-transaction screening should include address verification, the card security code (CVC or CVV), opt-in 30 SECURE verification, device authentication, and geolocation. To make a significant decline in threats like friendly fraud—and in the overall cost of doing business—Chargebacks911 finds post-transaction tools necessary as well. The company's Intelligent Source Detection® technology reduces all chargebacks to one of three fundamental sources: criminal fraud, friendly fraud, or merchant error, and deploys the right tools and strategy for each situation.
"The real threat," says Eaton-Cardone, "is the belief that nothing can be done about chargebacks—86% of which are due to friendly fraud, in which a consumer is denying a charge they themselves have actually made. That isn't true; the tools exist to fight chargebacks and win."
Chargebacks911 is dedicated to educating and supporting eCommerce merchants with services designed to boost revenue, shrink chargebacks and defeat fraud. To that end, Monica Eaton-Cardone and her team will be participating in the NRF 2020 Vision conference, New York, NY, January 12-14; Affiliate Summit West, Las Vegas, NV, January 27-29; [email protected] February, London, UK, February 4; ICE Totally Gaming, London, February 4-6; and the 2020 MAG Mid-Year Conference, February 11013, Atlanta, GA.
1. Reed, Dan, "Booming Travel And Tourism Is Driving Economies And Job Growth Despite U.S.-China Trade Strains," Forbes, March 8, 2019.
2. "Tourism Industry Market Overview and scope, Market Size, Future Outlook of the Market 2015-2025," MarketWatch, September 17, 2019.
3. Martinez, Gina and Bunyan, Rachel, "This American Said He Had to Pay $2,400 to Get Home After Travel Company Thomas Cook Collapsed," TIME, September 23, 2019.
4. "Airlines May Lose $2.8B to Fraud by 2020." Phocuswright, Phocuswright, 21 Mar. 2018, https://www.phocuswright.com/Travel-Research/Research-Updates/2018/Airlines-May-Lose-2-8B-Dollars-to-Fraud-by-2020.