Chargeback Reversal Rate of Just 10% Could Deal Fatal Blow to Travel Merchants Post-Covid, New Study Finds

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A fascinating new report, Fraud and Chargebacks in Travel, has been launched by merchant dispute specialist Chargebacks911, in conjunction with industry thought leader and travel research firm, Airline Information. It offers merchants a thought-provoking look at the substantial scale of the challenge that chargebacks present to the industry and proposes solutions for mitigating chargeback threats and payment fraud events.


After surveying more than 100 respondents across the airline, hotel and travel-related sectors, the report comes at a pivotal point in the post-Covid era. Payment fraud causes airlines to lose around 1.2% of revenue (around $1bn annually) according to estimates from the International Air Transport Association (IATA).


This is set against a bleak backdrop across all sectors, with the pandemic causing a sharp rise in chargebacks. The merchants surveyed in the 2021 Chargebacks Field Report noted a 25% increase of chargeback issuances, and this trend is likely to continue.


How bookings are made determine the levels of chargebacks, according to the new study. Half of those surveyed said chargebacks are more common when bookings are made direct, compared with third-parties or travel agents. This was especially true for respondents reporting more than 500 chargebacks per month.


Clearly airline and travel merchants recognize the importance of engaging in the representment process. Two-thirds of airline and travel merchants respond to 76% of chargeback requests – significantly higher than the reported 43% response rate across all merchant verticals outlined in the 2021 Chargeback Field Report.


Despite this, the results of the study issued a stark warning to the industry: a 10% chargeback reversal rate could prove to be a fatal blow to a travel merchant’s chances of survival in the post-Covid landscape.


Christopher Staab, Co-Founder, Airline Information, added: “The whole industry is acutely aware of the pressure it has been under over the last two years. However, there are clear and encouraging signs that the sector will experience not only a resumption of normal business, but a surge of consumers desperate to explore the world once again. Which is why we welcome this research from Chargebacks911 and encourage airline and travel merchants to continue to be proactive and remain vigilant in striving to keep fraud and chargebacks in check.”


Monica Eaton-Cardone, COO and Co-Founder of Chargebacks911, explains: “The travel industry has suffered the most devastating economic impact from the pandemic. It continues to lose revenue; refunds are requested on a massive scale and the ever-rising numbers of chargebacks spell the collapse of several travel providers worldwide. There’s been a clear structural change in chargebacks after COVID-19. Travel is getting back to a new normal, and chargeback activity will follow suit. We’re seeing a surge of travel-related chargebacks, foreshadowing another round of ‘dispute contagion’ – a clear indicator of growing behaviour trends. Merchants can’t afford to ignore this problem.”


While experienced airline and travel merchants have been more proactive than other verticals in keeping fraud and chargebacks in check, the study highlights how effective chargeback management needs to be an ongoing priority. A massive 62% of respondents want greater industry collaboration, including integrated technology systems and data sharing, to help identify evolving fraud and chargeback methods. The research found 37% of respondents could only identify one in ten chargebacks were friendly fraud, despite knowledge of over five times this figure being most likely. Reports confirm that merchants lack the internal resources and expertise to effectively tackle this problem.


“One of the reasons for the growing number of chargebacks is the lack of defence against friendly fraud. Once committed, most merchants don’t realise that if they let it go, they’re admitting fault – and inadvertently rewarding the wrong behaviour. 50% of those fraudsters that get away with it will do it again in as little as 60 days. This doesn’t just impact the merchant’s business, it has a trickle-down effect for others, too. We’re seeing lots of very creative avenues for fraud and chargebacks being exploited. Merchants must be on their toes. It all comes down to knowing your customer and having access to more data to be able to identify suspect behavioral trends,” says Eaton-Cardone.


Another unwelcome side-effect of the pandemic is the surge in double refund rates, also known as Double Dipping. Double Dipping occurs when a customer seeks a refund from both the travel company and their credit card provider. The research found an alarming 60% of respondents seeing an increase in double refund rates since the pandemic began. Yet despite the mountain of challenges the industry faces, there is much that can be done to mitigate these.


Eaton-Cardone adds: “When you look at chargebacks in vulnerable sectors like travel and tourism, you need a full end-to-end strategy including front-end fraud prevention and post-transaction fraud management. It’s not just about identifying criminals; it’s about understanding what’s behind friendly fraud. Sometimes it’s truly accidental, and you don’t want to blacklist genuine customers. If you don’t have that intelligence, it’s going to affect your authorization rates.”


“Any merchant should focus on their core competencies, like improving the customer experience, and paying attention to customer service. I would challenge merchants to look at how they can make smarter decisions and recognize the technologies available to assist them. That way, everybody wins.”


To read the full extent of chargeback threats facing travel merchants, and the current solutions that are enabling merchants to protect their bottom line, download the full guide at:


Chargebacks911 will also be at the IATA conference: Digital, Data and Retailing Symposium in Madrid, Spain from 26th October. Learn how to register for the symposium and meet with Chargebacks911, here:

Article by Chargebacks911

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