Travel agencies are facing increasing financial risks due to first-person misuse, a form of fraud where customers receive a service and later claim a refund via chargebacks. Unlike traditional payment fraud, first-person misuse involves genuine customers disputing transactions with their banks, often resulting in refunds that the agency must absorb.
Under Australian Consumer Law (ACL) and Australian Competition & Consumer Commission (ACCC) guidelines, businesses are often required to refund disputed transactions, even if services were delivered as promised. This makes it challenging for travel agents to manage financial risk while maintaining customer trust.
Understanding First-Person Misuse
In travel, first-person misuse, sometimes classified as ‘friendly fraud’, typically occurs when a customer books and completes a trip but later disputes the payment, claiming they did not authorise the transaction or did not receive the expected service. Common examples include:
- “Service Not Received” Claims: A traveller uses the service but later tells their bank they did not receive what was promised, triggering a refund.
- False Unauthorized Transactions: A customer books travel using their own card but later disputes the charge, stating they were unaware of the transaction.
- Cancellation Refund Claims: A client cancels after travel and claims the service was misrepresented, leading to a forced refund.
- Group Booking Disputes: A customer books for multiple people, some or all of whom travel, but later disputes the charge for the entire booking.
Reports by Visa and Mastercard indicate that friendly fraud and misuse is steadily increasing as one of the major forms of credit card fraud worldwide, with it affecting one-third of all merchants across the globe. It is the second most common type of fraud around the world, representing as much as 75% of all chargebacks in some areas.
Challenges for Travel Agents
When travel agents are faced with chargebacks, the impacts are felt quite acutely - they are treated as the service provider by chargeback scheme rules, meaning the onus is on the travel agent, not the travel supplier to dispute the chargeback. With banks and chargeback policies often favouring the consumer, it can be quite challenging for agents to dispute these chargebacks. In 2024, Visa reported that 84.4% of chargebacks were lost by businesses, indicating that even if agents provide clear evidence that the service was delivered as described, they may still struggle to contest disputes, leading to:
- Lost Revenue – Agencies must refund disputed payments, even if the service was provided.
- Lost time – disputing transactions takes away valuable time from serving other customers.
- Outstanding Supplier Payments – Businesses remain responsible for paying airlines, hotels, or tour operators, even after refunding the customer, or losing funds to a chargeback.
- Higher Chargeback Ratios – Frequent chargebacks can increase transaction fees or lead to restrictions from payment processors.
How Mint Protect Supports Travel Agencies
Mint Protect is designed to help travel businesses manage payment risks and reduce losses from first-person misuse. It provides:
- Stronger Payment Authentication – Helps verify and document legitimate transactions.
- Chargeback management– Mint’s support team will manage your chargeback response and arbitration.
- Chargeback guarantees – Lost chargeback claims will be paid by Mint in cases of fraud, supplier failure or non-delivery.*
Taking Proactive Steps
As consumer protection regulations evolve, travel businesses need effective payment security solutions to minimise financial risk. Mint Protect provides the tools to manage chargeback disputes and improve transaction security, helping agencies maintain stability and confidence in their payment processes.
Contact us today to learn how Mint Protect can help you resolve the costly losses associated with chargebacks.
Article sources
- www.afca.org.au/about-afca/publications/factsheet-chargebacks
- https://www.cybersource.com/content/dam/documents/campaign/fraud-report/global-fraud-report-2024.pdf
- https://b2b.mastercard.com/news-and-insights/blog/what-is-friendly-fraud/
- usa.visa.com/visa-everywhere/blog/bdp/2022/06/15/what-every-merchant-1655330664445.html
