How to open a travel merchant account?
The travel industry is one of the most dynamic ones. But due to its specifics, some businesses that represent it may be classified as high-risk. In this article, Maxpay will explain why it is so, we will give tips on how to open a travel merchant account, and which documentation is needed to be prepared.
What is a high-risk business and is it bad to own one?
A high-risk business is a business that in any way can bring more operational risk to an acquiring bank that has issued a merchant account for this business. Because of the potential financial risk to the bank, a high-risk account is more complicated to issue regarding the submitted documentation. Also, the fees are usually higher for the launching and processing. High-risk merchant accounts do not live long in terms of financial cycles, and sooner or later they most likely experience a termination.
Why does a business become high-risk?
A high-risk business potentially can generate a big number of chargebacks. It is the main reason why a business is labeled as a high-risk one. Besides that, there are other reasons such as bad credit history or no history at all, multi-currency trading, business registration location, and so on.
But is it bad to own a high-risk business?
No, it is not. A high-risk business is just a business that requires special financial attention due to the excessive amount of chargebacks it can generate. The truth is that some industries are automatically labeled as high-risk because of the mentioned reason.
Which industries do banks consider as high-risk?
- Adult entertainment
- Subscription-based businesses
- Gambling and betting
- Multi-level marketing
- Avia companies
- Travel agencies
- Dating sites
- Social networks
- CBD products
Travel industry types of companies
- Travel agencies
- Independent travel agents
- Online travel booking websites
- Tour operators
- Timeshare resellers
- Cruise lines
- Ticket vendors
Why is the travel industry high-risk?
A travel industry, along with the aviation industry, is usually treated as a high-risk one. It is so because both can potentially generate a high amount of chargebacks. Also due to the number of transactions getting very high, exceeding an established by the acquirer limit. When it comes to chargebacks, the travel sector brings a lot of them. Just think how many people per season do book the trip, and then cancel it because of personal, work, weather, or any other possible reasons.
Besides that, the travel sector is determined as high-risk in many cases because of the quite long period between the purchase moment, and the actual service occurring. And so the transaction is processed much in advance compared to the delivery of the travel service. And at last, a global customer pool, together with high-value purchases, ensures that the travel industry stays put at high risk.
Reasons why the travel industry is high-risk:
- generates a high amount of chargebacks;
- exceeds a transaction volume;
- frames a long period between a purchase and a service;
- works internationally;
- operates with high-value transactions.
The travel industry as high-risk
To obtain a travel merchant account a company must, first of all, prepare the required documentation. And, at the same time, set up the website. Three major merchant service providers can issue a travel merchant account and offer other needed services to accept payments on the website.
An acquiring bank is the only financial institution that offers a travel merchant account for both eCommerce and physical stores. A payment service provider proposes its travel merchant accounts only for online businesses, but with fewer charges. The same thing with the last type – a payment gateway service provider operates only online and offers various merchant services.
Tips for the travel merchant account application
Here we have listed some tips for travel industry merchants that would help with preparing the documentation and getting the faster approval of the account.
What are the merchants’ planned actions on preventing fraud and chargebacks?
When the merchant application describes how to keep the chargeback ratio on a low level, at least as much as possible for the travel industry, that would help a lot for an acquiring bank to see that a merchant takes the account issuing seriously. The same is with fraud, a bank wants to understand that a business will be well protected, and so it is safer for the bank to issue an account. We recommend including a detailed list of how to control fraud attempts and chargeback ratio. The proactive actions prove a capability of managing the merchant travel account.
What is a merchant’s financial failure insurance scheme?
A financial failure insurance plan is not an obligation by an acquiring bank. It is needed neither for application attached documents nor for the final approval of a travel account. Still, if a merchant does include this file, it can help in the process of verification.
What industry organizations and companies the merchant is affiliated with?
Basically, for the travel merchant account approval, there is no need for any affiliation. But in a case, if a merchant does belong to any, this might become a supportive point for the application.
Requirements for the travel merchant account
- A valid up-to-date government-issued identification document of a merchant, together with copies of the same identification documents for all businesses, officers, and owners.
- A filled-in application form. It usually includes information about the structure of a business, its turnover, and geographical preferences.
- Social Security Number or Employer Identification Number documents.
- Certificate of incorporation – it ensures that the business is a legally certified entity. Normally, it is a governmental structure or corporation that can sign this type of document. The time you can have this document on hand varies from three days to two months, it depends on the country’s laws for businesses.
- Certificate of incumbency or its equivalent.
- A pre-printed voided check or a bank letter along with bank financial statements for the last 3 months.
- A secure fully-functioning website.
- Business company name in the footer of the website.
- Terms & Conditions page.
- Contact button with various ways of communicating with you, such as an email, phone number, or chat.
- Deposit & Refund Policy page.
- Logos of the accepted payment methods such as Visa, Mastercard, PayPal.
Maxpay is a payment gateway service provider that helps with merchant account opening for travel businesses. We also offer fraud prevention services, chargeback alert services, implementation of a full payment cycle on the website, and many payment methods. To find out more, visit the Maxpay website.