As a travel business owner, you’re no stranger to the unique challenges and risks that come with operating in the travel industry. From fluctuating currency exchange rates to cancellations and no-shows, travel businesses face a myriad of risks that can impact their bottom line. That’s where acquirers, or merchant services providers, come in. So how do acquirers mitigate risk for travel businesses?
In the past, acquirers used methods like rolling reserves, ABTA/ATOL sponsorship/membership, and collateral terms to manage risk for travel businesses.
- Rolling reserves mean that a portion of a merchant’s sales is held for a certain time to cover potential chargebacks or refunds.
- ABTA and ATOL sponsorship/membership ensured that businesses followed industry regulations and provided financial protection to customers in case the business failed.
- Collateral terms required businesses to provide collateral, like cash or assets, to secure their merchant account.
Since then, acquirers now have more innovative options to manage risk for travel businesses including trust facility, acquirer-protected risk, and risk management.
- A trust facility involves setting up an account where a portion of a merchant’s sales is held to cover potential refunds or chargebacks. This option provides more control to the merchant compared to rolling reserves, as the merchant keeps ownership of the funds and may earn interest on the trust account.
- Some acquirers offer protection options to cover potential insolvency risks to the acquirer. This can provide added protection and peace of mind to acquirers, as the protection alleviates some of the risk this allows acquirers to offer more lenient collateral terms with some instances resulting in no hold on funds. This is an increasingly popular option but is not currently available across all acquirers. We expect to see the number of acquirers increase with this being a better cashflow alternative for travel businesses.
- Acquirers may use data-driven information and risk management tools to identify and prevent potentially fraudulent activities. These tools may include date of departure alongside monitoring transactions for unusual patterns, tracking geolocation, and checking transaction velocity to detect and prevent suspicious transactions. By using data, acquirers can proactively manage risks and prevent chargebacks or fraudulent activities.
Managing risk is not a one-size-fits-all approach, and the best option for your travel business depends on your unique needs, risk profile, and processing requirements. Our professional team at Axcess Merchant Services understands the travel industry in-depth and can offer customised solutions to manage the specific risks your business faces.
It’s important to carefully evaluate the available options and partner with a reputable acquirer that understands the unique risks of the travel industry to ensure the success and sustainability of your travel business. Find out more about our travel payment options and speak to a member of our knowledgeable team today.
