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According to the Bureau of Transportation in 2019, United States airlines carried nearly 926 million passengers – more than ever seen in the years before. However, in March of 2020, the United States carriers alone saw their air travel demand decreased by 36% from that of the previous year due to the unexpected COVID-19 pandemic. This is a clear example of why payment processing for airlines is high risk. Despite the obvious need for this method of travel, airline businesses are extremely volatile. Mainly due to unpredictable circumstances that are outside of the industry’s control.
In order to help navigate the financial risks of the industry, airline companies need to acquire a high risk merchant account for airlines through a high risk payment processor that specializes in this area.
An Overview of Airline Industry Risk
Air travel has become an essential method of transportation throughout the modern world. With the simple click of a button, anyone can book a flight to any destination on the globe. The world is rapidly becoming more connected through advancing technology, communication, and air travel.
However convenient, the nature of this high volume global system complicates things for the airline industry. Simply put, airlines face several high risk factors. Some of the most pressing risks in the industry are:
- High Volume Sales
- Vulnerability to Chargebacks
- Use of Different Currencies
High Volume Sales
The layers of new technology, payment processors, and travel advisors have made it possible for literally millions of airline bookings to occur at any given time.
But this is something airlines have struggled to keep up with for years. The amount of transactions means more room for error and subsequently a higher possibility of money lost. High volume businesses need special consideration to be able to do process payments like any other company. They need the bandwidth to support the transactions and more stringent filters for catching fraud.
Travel delays, overbooking, and cancellations have been a continuous shortcoming for the industry with no overarching solutions to mitigate them.
Vulnerability to Chargebacks
For an example of this risk, you don’t need to think too far back. The hit that airline businesses took in March 2020 due to COVID-19, paired with the increase of canceled flights and refund requests, has created a surge of chargebacks that will last over the next few months.
A chargeback is when a customer disputes a transaction to their bank for being ‘not authorized’ or ‘not fulfilled.’
Since airline companies now handle a majority of their ticket sales online, they are much more vulnerable to this risk. Even if the purchaser is enacting these chargebacks unlawfully, it still imposes a risk on the airlines’ payment processing account. High volume and eCommerce sales naturally see this occurring more often than in-person purchases. No matter the climate of consumer demand, there will always be a high risk for chargebacks in this space.
Use of Different Currencies
Major airlines have transactions coming in from dozens of countries each day. Processing such a high number of these currency exchanges can be seen as an extra hassle and risk for traditional financial institutions.
Not all supporting banks can deal with currency from other countries. This makes it especially important to have a merchant services provider that can support airline businesses big and small.
What Airlines Can Do To Mitigate Risk
It is important to discern the factors that make airline businesses high risk. This way you can be aware of what options you have to overcome them. Many financial institutions are looking for merchants that have lower risk factors, therefore your business may experience a stricter application process and more intense compliance regulations.
The high risk nature of the airline industry typically requires them to pay higher-than-average processing percentages and larger startup fees. But as your airline business grows, the payment processing provider will be able to reduce that risk and negotiate on your behalf to get those charges down.
This is why a high risk merchant account is so important. They can set up your airline’s business with risk mitigation procedures that make the process of getting an approval so much easier.
Chargeback Protection Tools
To help mitigate your risk for chargebacks, an integrated chargeback prevention tool attached through your payment processor is the way to go. They can’t stop each dispute, but they give you a much better chance to catch a chargeback before the bank gets it. It is such an important tool to use if your account is being hindered by disputes of this kind.
In addition to that, there are a few ways to set up your website so that chargebacks occur less often. Working with the account manager at your payment processor is the best resource you have to detect these roadblocks and propose changes.
High Risk Merchant Services for Airlines Can Help
While it may be costly, there are still high risk payment processors that are designed to work with you no matter your risks. The best-proven method for airlines to mitigate the inherent risks of the industry is to find a high risk merchant account for airlines. This is because these processors understand the variety of circumstances businesses face. These processors also give their merchants the opportunity to utilize PCI compliant and integrated virtual terminals to help reduce risk, prevent fraud, and tackle the obstacles that come with it.
By opening a high risk merchant account for airlines, your payment processor can customize and build a plan specific to the needs of your company.
Don’t let the term high risk hold you back from pursuing a business idea that involves the airline industry. At the end of the day, there will always be a need for air travel. When managed well, the benefits and profits of this industry can exceed the risk. If the advancement of technology and globalization is any hint, it is likely that global business and travel will only continue to grow. The factors that categorize airlines as high risk can be well managed when you find the right high risk merchant account for your business.