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Leveraging Technology to Prevent Hotel Chargeback Fraud in 2024

From leveraging chargeback analytics to implementing AI-powered fraud prevention tools, hotel CTOs have a range of strategies at their disposal to safeguard against chargeback fraud in the digital age.

The task of effectively preventing and disputing illegitimate chargebacks can be a significant challenge for hotel owners and operators. Given that consumers have become increasingly price-conscious in light of economic uncertainty and the depletion of savings accumulated throughout the pandemic, in addition to being more likely to submit chargebacks on legitimate cancellation fees, hotels today need to be that much more vigilant and proactive in their defense against chargeback fraud.

However, while common best practices such as revising hotel policies for clearer communication can be helpful, effective prevention of chargeback fraud in the digital age often requires much more dynamic solutions, including the strategic utilization of advanced fraud-protection and chargeback management technologies. Let’s take a closer look at just a few ways hotel CTOs can leverage technology to more effectively prevent and dispute chargebacks.

Chargeback Analytics

Businesses across industries have been enjoying the myriad benefits of advanced data analytics for more than a decade, and while typically more closely associated with digital marketing processes like personalization, analytics can be equally transformative in generating valuable insights that lead to smarter, more effective chargeback prevention strategies.

More specifically, analytics tools give hotel IT teams the ability to collect and analyze both historical and real-time transactional data to reveal common chargeback trends and draw conclusions about their causes. In other words, by learning as much as possible about why chargebacks are occurring in the first place, whether it's tied to customer behavior or operational efficiencies, businesses are in a much better position to anticipate and prevent them from happening in the future.

In addition to deriving trends from transaction data, advanced analytics can be used to look back on prior disputes and learn more about why and how often certain chargebacks are reversed or upheld. This helps hotel technologists better identify areas where chargeback risks are most concentrated and can reveal potential inefficiencies in the overall dispute process.

Enhanced Alert and Communication Systems

Being able to take action as swiftly and efficiently as possible is critical when it comes to both preventing and disputing illegitimate chargebacks. Moreover, because not all chargebacks will be the result of fraud, it’s important to be able to tell the differences between certain types of disputes and how best to respond in each situation.

Fortunately, the underlying technology behind certain chargeback alert systems today is more powerful than ever before, allowing response teams to more efficiently receive and more thoroughly understand the type of chargeback being requested. More specifically, through the use of intelligent automation, enhanced alert software can be programmed to dismiss the kinds of alerts that don’t lead to chargeback prevention, as well as assign custom alert response strategies based on the type and perceived legitimacy of the claim.

Additionally, similar technology exists to help automate and streamline the collection of critical transaction data needed to analyze and dispute an illegitimate chargeback, as well as the process of transmitting the data to the relevant card issuer. This is an absolutely crucial capability when it comes to speeding up response times and helps reduce the resources needed to address individual claims and ultimately prevent more illegitimate chargebacks in a smaller window of time.

AI-Powered Security and Fraud Prevention Tools

Finally, in the hotel and hospitality industry, fraud prevention systems are responsible for catching and preventing suspicious activity across a wide range of touchpoints in the customer’s journey, including the initial booking process, transactions made throughout the stay, and any final charges processed during checkout. However, in today’s highly dynamic digital payments space, fraud prevention systems must also be intelligent enough to adapt criteria based on rapidly evolving trends, as opposed to applying static triggers based on generalized rules or industry best practices.

This is where artificial intelligence (AI) and machine learning algorithms come into the picture, providing hotel operators and their response teams with fraud prevention tools and systems built to continuously improve and adapt to the latest trends. By recognizing and consistently learning from patterns observed from both the real-time monitoring of customer transactions and historical data, the algorithms deployed across fraud protection systems become increasingly adept at everything from the categorization of perceived threats to the automated prompting of additional verification based on suspicious activity.

For an immediate example, machine-learning technology can be used to significantly improve the risk-scoring process, making it easier to both anticipate and respond to potential instances of chargeback fraud. Taking into account everything from transaction histories to deviations in customer behavior, risk-scoring algorithms increase in both accuracy and response time as they learn and gain confidence, leading to the vastly more intelligent and reliable assignment of customer risk profiles.

To be sure, the above only begins to scratch the surface of how valuable advanced technology can be for hotel owners and operators pushing back against an increasingly active and constantly evolving landscape of chargeback fraud. While identifying the most effective solution will be highly dependent on the individual operation, the most important takeaway is that technology has quickly become an essential component of any hotel’s fraud prevention and chargeback dispute strategy.


About the Author

Rodrigo Figueroa is a highly experienced professional in the field of Risk Management, serving as the Chief Operating Officer (COO) at Chargeback Gurus. His primary focus is on establishing a sustainable framework that facilitates company growth while overseeing various aspects of operations, technology, and client success. With over two decades of expertise in the Investment, Commercial, and Consumer Banking industry, Rodrigo has worked across multiple countries in the Americas, Europe, and Asia. His extensive knowledge encompasses governance, controls, eCommerce, payments, cards, P2P networks, Electronic Wallets, as well as areas like Enterprise Risk, Operational Risk, Cyber Security, Technology Risk, Audit, International Governance, and Regulatory Management for Banking and Payments. Rodrigo's proficiency in English, Spanish, and Portuguese, along with his diverse background and exposure to various markets and cultures, has enabled him to achieve remarkable results in challenging and diverse environments. He holds a Master of Science degree in Risk Management from NYU and currently resides in Plano, Texas.

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