Guest Post: Why automation is the answer to the growing challenge of chargebacks

Guest Post: Why automation is the answer to the growing challenge of chargebacks

Tania Platt, head of commercial at Amadeus' new payments division Outpayce, says travel firms must respond to the rising levels of card refunds from customers who are using consumer technology to make the process easier 

During the COVID-19 pandemic, the travel industry experienced an unprecedented rise in chargebacks — the return of money to a cardholder for a transaction. 

In the US alone, it’s estimated chargebacks cost travel one billion dollars. Recent data from Chargebacks911 reveals that one in eight chargebacks is now related to a travel purchase. Our industry research confirms this. 

Last year we found that travel agents and airlines were reporting 50% more chargebacks on average compared with 2019.

There were several reasons for the uplift in chargeback claims. Firstly, significant levels of disruption during the pandemic saw traveller awareness of chargebacks growing.  

Many issuers have made it easier for cardholders to initiate a chargeback. As the industry digitises, the chargeback process has followed suit. 

Often a chargeback can be initiated in a few minutes using a banking app on a mobile phone, and many issuers will credit the cardholder’s bank account while the dispute is in progress. 

The ease of the process itself appears to have also contributed to the significant growth in disputes. 

Furthermore, during the pandemic some customers contacted airlines to request a refund, and at the same time initiated the formal dispute process, which in some cases resulted in a chargeback to the airlines   

When chargebacks aren’t legitimate

The chargeback process exists to protect cardholders — protection is one of the reasons that cards remain such a popular payment method, particularly where relatively high-value travel expenditure is concerned. 

Unfortunately, the system is open to misuse, with illegitimate claims on the rise, potentially impacting travel companies. 

Industry estimates suggest that by 2023 as much as two-thirds of all chargebacks will be considered ‘friendly fraud’, where merchants shouldn’t be held liable. 

Friendly fraud occurs when a customer makes a purchase with a credit or debit card and then disputes the charge with their bank, even though they don’t have a legitimate reason to do so. But unless the merchant can defend a chargeback, the process tilts in favour of the cardholder.

A customer might mis a flight or decide not to travel. If the cost isn’t covered with a flexible ticket or insurance, then there is a temptation to raise a chargeback. 

There have been reports of travellers submitting chargebacks on spurious grounds, for example, where they haven’t received the signature cocktail during a flight or because the journey was ‘unreasonably turbulent’. 

The industry must be empowered to challenge these claims using data, so that businesses are better placed to settle legitimate disputes.

Tackling chargebacks with automation

Typically, chargebacks are still handled manually by internal teams at airlines, hotels, and travel agencies. 

For airlines and agencies with centralised payments departments, employees are often well-skilled but rarely have the resources to scale up. 

Many hotels handle payments locally at each property because of the franchise model — meaning front desk staff respond to chargebacks during the quieter night shifts. 

Obtaining the correct information to support a chargeback challenge is difficult too. For airlines, it should be possible to know with a high degree of certainty whether a traveller flew their ‘ticket’ or not, or whether the flight was delayed and if so, by how long. 

These are basic first steps in responding to chargebacks and are a simple way to filter out those disputes raised when the traveller was late and missed the flight.

Investing in technology that automates the gathering of such information is one option for airlines and other travel businesses for that matter.

By making certain information more visible via APIs, for example booking and payment information, there’s an opportunity to automate and significantly improve this increasingly important back-office function. 

At Amadeus, we recently partnered with Chargebacks911 to offer airlines a fully outsourced resource to better manage chargebacks at scale. 

This is a unique proposition as Amadeus can access real-time booking data. When an airline receives a chargeback, we will automatically retrieve the relevant travel and payment information to prepare an automated response to most chargebacks. 

More complex disputes are managed by a team of experts from Chargebacks911, who will be notified to investigate in greater depth. 

Essentially automating this process reduces the time and costs associated with manually processing these claims, freeing up staff and increasing productivity in other vital business functions.

Airlines are increasingly making payments a strategic priority. This is also true for all other global travel businesses such as hotels and travel agencies. 

These merchants are seeing the value in taking a proactive approach to managing com­­­­plex cross-border payment flows and chargeback management. 

In order to future-proof and ensure processes are resilient as travellers become more familiar with chargebacks, now is the time to automate this process.