The challenges airlines face in avoiding fraud and disputing chargebacks have been highlighted in the latest Airlines International webinar.
Most airline tickets are sold ‘remotely’ (with the credit or debit card not present) and the customer not physically facing the seller or travel agent. This means ticket sales are susceptible to fraud, with airlines regularly exposed to chargeback claims.
Speaking at the Avoiding Chargeback Turbulence webinar—which explored travel payment trends, effective risk management, and how airlines can protect themselves against chargebacks—Christophe Kato, Head, Industry Payment, IATA, described three main chargeback “families”:
fraud chargeback—where the cardholder did not make the transaction,
commercial chargeback—where there is a genuine dispute between the customer and the airline, and the customer claims the airline did not deliver the service promised,
and ‘first-party fraud’—where the cardholder abuses the system in order to not pay for a transaction they actually made.
Kato says a particular hurdle for airlines in disputing chargeback claims is that they are not told the identity of the claimant.
Airlines will have the history of the sale, and the flight manifest, but you can’t match that with the name of the claimant
“This is for a very good privacy reason,” Kato says. “If it is a fraud—and the cardholder has no relationship with the airline—then why should their name be given to the airline?
“However, this makes it very difficult for an airline to challenge a chargeback.
“Airlines will have the history of the sale, and the flight manifest, but you can’t match that with the name of the claimant.”
To compound this challenge, half of card-paid ticket sales are made through travel agents.
“But it is the airlines who will receive the chargeback,” adds Kato.
“And when an airline is trying to defend itself against the chargeback, it will have to rely on what the agent can share in terms of knowledge about the customer, which makes things more difficult.”
However, Kato says there are encouraging signs for airlines.
Airlines and agents are working together to try to define best practices and better control card transactions
Card schemes have amended their rules to allow the flight manifest to be submitted in evidence, so issuers can check if the traveler’s name has any similarity to that of the claimant.
Kato says more reform is coming, with the purpose of making it simpler for both parties to document disputes and resolve them fairly.
He also says airlines and travel agents are now working together to jointly address chargeback issues, adding the days of a ‘pass the buck’ attitude are “long gone”.
“Both airlines and agents are working together to try to define best practices, to better control card transactions, and to better dispute chargebacks when they come,” Kato added.
Christophe Kato was speaking alongside Eric William Pitts, Executive Manager, Payments, Sixt and Monica Eaton-Cardone, COO and Co-Founder, Chargebacks911, in the Avoiding Chargeback Turbulence webinar.