Impact of peak travel season on payment fraud

June 19, 2024

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Summer is upon us, and with it an influx of vacationers ready to explore new destinations. As the summer travel season begins, travel and hospitality companies must develop robust strategies to manage the expected increase in transaction volumes and fraud risks. These strategies must also effectively manage disputes and chargebacks during a peak travel period that is expected to break records.

Despite challenges like international unrest and rising prices, Americans still value their vacations. Projections from the Transportation Security Administration (TSA) indicate that we will see a record-breaking summer travel season in 2024. Authorities are anticipating the busiest travel season ever.

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

The driving forces behind this trend are millennials and Generation Z. People in this age group tend to value experiences more than material goods and strive for a healthy work-life balance in order to experience new places and cultures. They are also heavily influenced by social media, where many influencers present travel as part of a sophisticated lifestyle.

This increase in travel is driving global business at all levels of the economy, but it is also leading to increased risk awareness. It is critical for companies to effectively manage fraud and chargeback risks year-round to navigate the travel space.

Let's explore the best strategies and tactics for dealing with these threats, whether in-house, hybrid or outsourced, and why asking for help might be the most effective move this year.

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The challenges ahead

While a travel boom is fantastic for businesses and local economies, it also brings with it significant challenges that underscore the need for comprehensive fraud and chargeback management. An exceptionally busy travel season can exacerbate existing chargeback triggers that already exist in the travel space. We may see:

Increased transaction volume. The huge volume of transactions during peak travel season makes it difficult to accurately manage and monitor each transaction. This increased volume can overwhelm internal systems, leading to errors and delays in dispute processing, and therefore more chargebacks.
Fraudulent activity. Fraudsters take advantage of peak seasons, knowing that high transaction volumes can obscure their activity. From fake travel offers to phishing emails, the types of fraud targeting travelers are varied and sophisticated, increasing the likelihood of chargebacks due to unauthorized transactions.
Overbooked flights and hotel shortages. High demand can lead to overbooked flights and sold-out hotels. When travelers are turned off flights or denied rooms, dissatisfaction increases. The same goes for the number of chargebacks when customers dispute charges for services they did not receive.
Poor customer service. During peak periods, staff shortages are common, resulting in longer wait times, unresolved complaints, and poor service. Frustrated customers often turn to chargebacks to resolve their complaints when they feel neglected or mistreated.
Operational burden. Handling a surge in transactions requires a well-prepared operational structure. Without it, businesses may not be able to process payments and refunds in a timely manner, further angering customers and leading to more disputes and chargebacks.
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 harm its relationships with financial institutions. High chargeback rates can result in higher processing fees and, in severe cases, loss of merchant processing privileges.

When you consider what's at stake, you can understand why it's so important to make effective chargeback management a top priority. Aside from saving time and money, it can also help build customer confidence during peak travel season.

Managing chargebacks: in-house, hybrid or outsourced?

Tour operators can use one of three chargeback management strategies to address the increased demand and potential challenges described above.

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

A second option is to outsource everything. This allows travel companies to benefit from expertise and advanced technology without having to maintain an in-house team. Third-party providers can offer scalable solutions, real-time fraud detection and comprehensive chargeback prevention strategies. However, this can also mean that merchants lack the oversight.

As a third option, merchants can try a more hybrid approach. By combining internal efforts with external support, companies can leverage advanced technologies and third-party knowledge 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 When Regulation Fails

Industry cooperation

As we prepare for a record-breaking summer, it's clear that improved industry collaboration could be key to combating fraud and chargebacks.

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

By leveraging open data, companies can gain valuable insights into traveler preferences and behaviors. These insights can be refined using AI to predict trends and adapt services.

Related: Think you can't do anything about chargebacks? Think again.

Open data and AI will have a much more symbiotic relationship in the future. The kind of collaborative effort that open data requires will create a safer environment for our customers and protect our businesses from the financial burden of chargebacks. These technologies promise to increase efficiency and innovation in tourism, help manage threats, and improve the overall travel experience.

Ultimately, travel operators must be proactive. By implementing the right strategies and fostering industry-wide collaboration, operators can thrive during this busy travel season and provide a better experience for all travelers.