Few industries are as competitive as international travel. A myriad of airlines, hotels, and tour agencies compete for the custom of would-be vacationers, each trying to outdo the other in the features they offer. Payment options are key to this, with big rewards for companies that are willing to innovate.
So it’s no surprise that cryptocurrency transactions are beginning to make their way into the travel space, a trend that looks set to accelerate throughout 2022.
The arrival of cryptocurrencies
In December, we heard that blockchain-based travel agent Travala.com was upgrading its Bitcoin payment provision, opening the door to millions more crypto bookings.
However, the big news came a few weeks later, with a striking cheep from Airbnb boss Brian Chesky. Having polled his followers on what new features they would like to see, Chesky happily shared that crypto payments had taken first place. Combined with an IPO prospectus hinting at the future use of digital currencies, the company’s intention to accept crypto at checkout is clear.
Such a move would be significant for the industry. Valued at more than $100 billion and with more than 150 million users worldwide, Airbnb is a titan of the travel industry. With ongoing concerns about the volatility, practical feasibility, and even environmental impact of cryptocurrencies, having the backing of such a powerful brand would be a model for others to follow.
Those who do are likely to have a captive audience, research suggests. As a group, travelers are decidedly more likely to own crypto than the general public: a people room who make between one and four trips a year claim to be Bitcoin users, compared to 16% of the US population as a whole.
(Not so) friendly fraud
Travel companies adopting cryptocurrencies may also hope to make progress on the payment fraud front. So-called ‘friendly fraud’, when customers use chargeback systems to dishonestly reverse transactions and recover costs, is a particularly serious problem for the industry. But because crypto transactions are done on secure decentralized electronic ledgers and cannot be reversed after both parties have agreed, chargebacks are not possible.
However, scammers are a devious bunch. It is possible that the digital coins could be purchased from a cryptocurrency exchange with a conventional bank card and then used to book travel through a vacation company that supports cryptocurrency payments. Citing a fictitious case of card fraud, the customer could instigate a chargeback claim against the original provider, the exchange, while keeping their vacation plans in place. Lacking full details of the crypto transaction, it’s not hard to imagine the card issuer ending up supporting the cardholder’s case.
Friendly fraud cases have skyrocketed in recent years, with more than two-thirds of online merchants reporting an increase in illegitimate claims as a result of the pandemic. Travel businesses have been particularly hard hit, with airlines and vacation businesses 33% more likely to respond to chargeback requests than other businesses.
However, the fortunes of the industry could be about to change. International travel, which has been curtailed due to Covid, is expected to return to relative normality in 2022, amid growing optimism about the vaccine and hope around the lesser virulence of new coronavirus strains.
This kind of positivity should be applauded, but expectations should be measured. If the sudden appearance of the Omicron variant has taught us anything, it is that the pandemic landscape can change devastatingly fast.
an easy target
Travel companies have tight margins at best, giving them very little room to maneuver when targeted by friendly scammers. According to the International Air Transport Association (IATA), the airline industry alone loses at least $1 billion a year due to chargebacks.
Last minute reservations are a big part of this. Spontaneous purchases are big business for travel providers, but are often a vehicle for attempted fraud. Customers looking to make a quick buck can easily take advantage of fast delivery times, while carriers struggle to review purchases or dispute claims in time.
What’s really tricky for travel companies is that the opposite of last-minute bookings (trips planned well in advance) are just as vulnerable. Travelers often like to book months in advance of departure, eager to secure seats and rooms before vacancies disappear or prices rise. The result? Plenty of time for doubts.
The coronavirus has amplified this risk of buyer’s remorse. Perhaps a passenger books a flight, but doesn’t realize the cost of mandatory pre-departure testing. Perhaps they haven’t researched the quarantine rules in their destination country, or just don’t feel like making the trip, deterred by gloomy health-related headlines after all. And so they try to reverse your payment through a chargeback.
Scenarios like these have come up time and time again since the arrival of Covid-19, with friendly fraud chargebacks up to 25% only in the first quarter of 2020.
the best defense
These types of scams, perpetrated on a large enough scale, can take a business down, especially if you haven’t encountered chargeback fraud in the past. That’s why chargeback mitigation services are so important, allowing businesses to focus on other priorities while handling suspicious claims in the background.
Looking ahead to next year, other priorities will not be lacking for travel companies. Its industry has been hit by a coronavirus, but now, at last, there is real hope of recovery. Coupled with an increased appetite for crypto payments, 2022 promises to be a very busy year.
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Guest post by Roenen Ben-Ami of Justt.ai
Roenen Ben-Ami, Co-Founder and Chief Risk Officer of Justt.ai, is an expert in the field of payments and chargeback mitigation. Previously, Roenen led the Chargeback and Merchant Risk teams at payment services provider Simplex, which successfully recovered millions of dollars per year. He also served for nine years in an elite military intelligence unit in the Israel Defense Forces, rising to the rank of captain and spearheading the creation of an innovative operations department focused on change leadership, human resource development and Risk management.
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This post Friendly fraud warning as resurgent travel companies explore new crypto horizons
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