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  • Blog – Chargeback Fraud Soars Amid the Cost of Living Crisis

Blog – Chargeback Fraud Soars Amid the Cost of Living Crisis

4 min read

Chargebacks are more than a nuisance for your travel businesses. They eat into revenue, reducing your financial health one chargeback at a time. But that’s not all—they also damage your reputation with payment processors, potentially leading to higher fees or other restrictions. This instability is the last thing you need when you’re focusing on providing exceptional experiences for your travellers. In this article, we explore the wider chargeback problem and suggest strategies to combat chargebacks.

Chargebacks: A Growing Problem

In conversation with The Guardian, Serpil Hall, head of fraud prevention at Celebrus, formerly D4t4 Solutions, a firm that deals with fraud and scams, explained the current situation with chargebacks. “Chargebacks were designed as a consumer protection mechanism, allowing individuals to dispute unauthorised transactions or cases of fraud. However, an alarming trend is emerging, where individuals are exploiting the systems for personal gain,” she said.

While chargebacks may be classed as ‘friendly fraud’, they’re anything but friendly. Consumers struggling with the cost of living crisis use chargebacks to recoup their money after using services. In 2022, when the cost of living crisis first took hold, 44% of UK consumers filed at least one chargeback. However, 60% of them didn’t know that the merchant pays for the cost of the chargeback. Research published last year revealed that over 70% of travel companies have reported rising chargebacks post-pandemic. 

But it’s important to note that the cost of living crisis isn’t solely to blame for the rise in chargebacks. Some committing friendly fraud are taking this route because they perceive it as easier than seeking a refund, and it’s a straightforward process to initiate using their mobile banking apps.

Low Success Rates (And Possible Solutions)

Unfortunately, travel companies also appear to have a low success rate when it comes to challenging chargebacks. One study found that just a quarter of travel companies see more than 60% of disputes go in their favour. Contesting chargebacks takes time and resources— things that small to medium travel companies lack. However, there are steps you can take to reduce the impact of chargebacks:

Take proactive measures

While it’s important to recognise that some chargebacks are legitimate, there are immediate steps you can take to reduce illegitimate chargebacks. First of all, displaying your terms and conditions clearly throughout the booking process and requiring customers to actively acknowledge them (for example, with a tickbox) before they finalise their purchases is a good idea. By being transparent about your company policies, you set clear expectations and, in some cases, prevent avoidable misunderstandings.

Consider open banking

In response to high chargeback rates, some travel companies are embracing open banking as a way to cut costs associated with traditional card payment processing. Open banking payment bypasses expensive card networks and removes the option for customers to use chargebacks entirely. However, this isn’t the be-all and end-all solution for travel providers because most travellers prefer to pay with credit and debit cards.

Be reachable

If your customers pay for your services predominantly via card, there are several things you need to consider. First, it’s important to remember that many customers will only resort to raising a chargeback when they feel they’ve exhausted all other avenues. If they’ve spent too much time trying to get through to you, they may feel that initiating a chargeback is the only way to get their money back. Open communication is one of the best ways to reduce your chargeback ratio.

Dispute illegitimate chargebacks

If you receive a dreaded notification from your merchant services provider that a customer has initiated a chargeback, and you disagree that they’re entitled to a refund because they used your service, make sure to dispute it! If you fail to do so, the chargeback will be upheld, and you’ll lose precious revenue.

Disputing chargebacks is time-consuming and resource-intensive. That’s why Trust My Travel subscribers receive chargeback support from our experienced fraud specialists. We’ve worked with hundreds of travel companies since 2012, helping them navigate the complex travel payments space. Contact us today to learn more about how we can improve your payment process, from disputing chargebacks to providing financial protection for your travellers.

What is a Chargeback?

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