Whether traveling for leisure or for work, flying proves to offer the greatest convenience and time efficiency. That’s why today, the US airline industry stands valued at $80 billion USD. And while that might seem significant enough, experts estimate that number to double over the next few years.
If anything, now would be the perfect time to set up an airline or private jet charter service. With the industry thriving and the market at a constant desire to travel, even new businesses have the assurance of financial success. The only problem? The struggle of getting a high-risk airline merchant account.
Let’s be real, people hardly ever pay with cash these days. According to statistics, over 70% of transactions in the past year were paid for with credit or debit cards. A smaller fraction represented other forms of digital payments, while cash transactions stood for less than 10%.
Depending on your business operations, you could take cash payments in person if you decide to have a physical booking office. But, most of the time, payments will filter in through an online air travel booking portal.
In order for you to accept digital payments in whatever form (including credit card, debit card, eChecks, and ACH payments) you’ll need a merchant account. Granted only to businesses, the merchant account facilitates digital payments and serves as the holding area for any funds that come from cashless transactions.
Businesses with merchant accounts can take digital forms of payments online or in-store. The ultimate purpose of having a merchant account is that it allows you to offer payment methods that expand your access to your consumer base.
The only issue however is that merchant acquiring banks that provide these merchant accounts typically view airline and private jet charter services as high risk. This makes opening a merchant account with a traditional provider a major struggle.
What is it about airline and private jet charter services that make them high-risk? Remember that in the financial world, ‘risk’ ultimately pertains to potential losses. Anything that would cost your merchant acquirer money is perceived as a risk.
In the case of merchant accounts, risk comes in many forms, but mainly takes the shape of chargebacks. When people pay with a credit or debit card, they have the option to file for a chargeback.
This process reverses the payment without contest so that the individual gets their money back for what they perceive as a transaction gone wrong. This poses a threat to banks and card issuers because chargebacks cost money.
So when they perceive that a business might have a higher risk of chargebacks, they tend to avoid approving merchant account applications. But what is it about airline services that make them uniquely predisposed to chargebacks? Here are a few reasons:
Typically, airline travel customers book their flights months before the expected date. And although they might have an idea as to what their situation and availability would be at that future date, there are no guarantees.
When plans change or even when the weather starts to get unpleasant, customers can cancel their flights. Of course, others opt to reschedule their booking, but those who can’t see a potential opportunity to fly in the near future will want their money back.
Some airline travel services offer refunds for flights, especially in cases where issues arise outside of the customer’s control. But clients who want their money back for personal reasons probably won’t get the refund benefits that airlines provide. So what’s the next best thing? A chargeback, of course.
Air travel is expensive. On average, a domestic, roundtrip booking with large-scale, commercial airline costs around $330. International roundtrip flights cost upwards of $800. But for smaller airlines and for private jet charters, flights could cost thousands of dollars.
For traditional banks and financial services providers, merchants with an average transaction cost of over $500 fall under the high-risk category. That’s because when transactions cost so much, a single chargeback could hit banks and card issuers with exorbitant penalties.
Even more problematic is the fact that many of these private jet charter services only have five or six transactions in a month. If bad weather conditions force all of those transactions into chargebacks, banks get faced with incredibly expensive reversals and their associated fees.
If you had a physical booking office, then cash payments might be possible. But more often than not, people use credit and debit cards as their primary payment method of choice. In fact, statistics show that over 70% of all transactions get paid for with a card.
For online bookings, things get a little more complicated. Paying without a physical card gives rise to a number of potential dangers. For instance, fraud becomes a much more possible reality since all you need in order to complete the payment would be the information on the card.
Airline travel merchants are uniquely predisposed to chargebacks because the chances of people having their credit card information used without prior authorization becomes more likely with card-not-present payment options.
Although it is possible to get a high-risk airline merchant account through a traditional bank, it’s not necessarily advisable. These providers do what they can to protect their own interests, even if that means sapping your business for any potential growth.
To guarantee that they’re protected against your business’s potential risk, traditional banks impose insanely rigid contract terms that require various payments, charges, and penalties to cover the future risk.
On top of that, they can also restrict disbursements to your account. Essentially, when you get paid for your products and services, their contract terms can delay cashout so you don’t get anything until after a certain (often prolonged) period of time.
Fortunately for you, there’s Shark Processing.
We provide tailored merchant account solutions that connect your business with reputable providers. Our network of merchant acquirers works willingly with hard-to-place merchants so you can get industry-standard services without stress.
Stop taking risks with merchant acquirers that don’t have your best interest at heart. Contact Shark Processing today to learn more about our merchant placement services, or send in your pre-application form to get started on your high-risk airline merchant account.