High Risk Merchant Account for Travel Industry
Merchants offering hotel booking, discount travel club services- why high risk?
The travel agency is one of the fastest growing industries. Travel agencies would also require larger money transactions. So this is one industry where a merchant account is all the more necessary. When we talk about high-risk merchants, travel agencies are in the top portion of the list. This is especially in the case where credit card processing in concerned. This is because with travel arrangements there are many transactions where people change their decision and revert their payments.
When we talk about online travel merchants, the risk is even higher. The ease of booking a travel online and the ease of canceling the booked tour are some of the reasons behind this. So if you are in the travel industry, especially if you are anew business holder, you would understand how difficult it is to set up a travel merchant account. So it is not going to be easy. You would have to approach the right vendor to get your travel agency’s merchant account up and running. This includes all online travel service merchants including travel booking, hotel and accommodation booking, vacation package booking and the likes.
The reason why travel agencies are considered high risk are due to the chargeback the credit card processing body has to face. Once a traveler books a travel with acredit card, if he initiates for a cancellation, there are cases where the tour agency doesn’t bear the chargeback in the process. This is when the credit card processing bodies would be put in trouble. Not just this but there are other factors making this business a high-risk one as well.
The amount spent in each transaction is relatively high every time. An average ticket would cost hundreds of dollars in most cases. Also the fact that a contingency sale happens here puts, even more, risk in picture.
Next, comes the vulnerability of the travel industry on the whole. Many companies also offer discount membership clubs, discounted travel, cheap travel services that also come with high chargeback risks.
With online travel agencies, there might be several things promised as part of the tour package. If there is some form of communication mismatch then it reflects on the reputation of the business and this is one reason why many travel agencies back out in their journey.
What to do when shut off by credit card processors?
Several major banks hesitate from offering merchant accounts for high-risk businesses like the travel agencies. Even PayPal, Stripe, Square and other similar players aren’t very happy to get associated with the high-risk merchant accounts. This is primarily because these sectors do not come with much of risk management in place. This is one reason why they prefer risk-free straightforward businesses.
As high-risk merchant account vendors might appear expensive, some stick with approaching the low-risk providers, which later might turn out to be a major blunder. Do you want your travel merchant account to be suddenly held up and frozen one fine day? If you do not want this to happen, the best approach would be to approach a high-risk credit card processor that can offer some of the best affordable merchant account services.
Hotel Booking - Airlines - Travel Friendly Merchant Credit Card Processing
Even with established travel agencies, it is considered a high-risk option for credit card processors. When it is a start-up, the risk is even higher. The credit card processor would, in general, do a check to see if the business is legitimate. They would also evaluate the risk involved and the higher the financial risks, the lower the chances of the conventional credit card processing bodies to grant a merchant account for the start-up.
Again, the high-risk credit card processors would come in the picture. These vendors can offer better approval rates for the new businesses. As they specialize in the area of high-risk businesses, their policies better suit the industry and thus makes them competent in handling such cases.
Domestic and offshore options for credit card processing
You have the option to set up a domestic merchant account or opt for an offshore one. Here are some factors about both to help you decide:
A domestic merchant account is mainly known for the ease of setting up. The paperwork required for the entire process is pretty less and the time taken for underwriter review is also pretty less. This might be longer with offshore underwriters.
Talking about the security, domestic ones are relatively easier to trust than the offshore ones. This is why many travel agencies go for domestic options than choosing the offshore ones.
Another marked difference between the options comes in the processing rates. The offshore options might charge higher processing rates. This might be a difficult scenario to tackle for smaller businesses or newer travel agencies. This is another case where a domestic option might be a better choice.
The terms of payout might be another distinguishing factor. Offshore merchant account providers might charge you higher for the transfers. Also unless your payouts are sufficiently high, you might get them only on a weekly basis and not on a daily basis.
Each of the options comes with its own ups and downs. Domestic merchant account services might appear the most fruitful option. But for some businesses, an overseas merchant would be a requisite, like in the case of those travel agents how primarily focus on overseas travel and the sales of overseas travel packages happen in large volumes. Understand the size and the scope of your business better to decide on the right option for you.