Travel payments carry a distinctive set of risks for merchants and the acquirers that support them:
Those features combine to make travel one of the highest-risk sectors card schemes process, with the highest average chargeback value of any industry.
This handbook covers the full spectrum of payment risks travel companies and the acquirers supporting them face:
A chargeback is the forced reversal of a card payment initiated by the cardholder's bank. For most sectors, it is a nuisance. For travel, chargebacks are one of the largest liabilities on the balance sheet, because the value per transaction is high and consumer protection rights are strong.
Travel and hospitality carry the highest average chargeback value of any industry at $120, and once fees, lost goods and administration costs are added up, travel merchants can lose hundreds. A single failed supplier or a wave of cancellations can generate hundreds of chargebacks at once, each one eating away at your revenue.
Chargebacks in travel come from four main sources:
What sets travel apart from other sectors is timing. Card scheme rules generally require a chargeback within around 120 days, but the chargeback window often runs from the expected date of service instead of the transaction date. For a trip booked far in advance, that can extend the window for well over a year after payment.
Let's look at an example: An operator sells a £2,000 package in December for travel the following August, and pays deposits to its accommodation and transfer suppliers in the winter. In August, the customer's circumstances change and they dispute the card payment rather than claim through the operator's cancellation policy.
The operator has already spent the money paying suppliers, yet they face a reversal plus a chargeback fee and all of the other associated costs many months after the sale was made. The operator did nothing to cause the chargeback, but they took the loss.
The immediate impact of chargebacks is on cash flow. When a chargeback is raised, the acquirer takes the disputed amount from your settlement before any investigation concludes, along with a fee. If you win the dispute, you may recover the cash, but in the meantime, that vital working capital is gone.
The larger impact is chargebacks happening in clusters. Chargebacks tend to cluster when a business can least afford them, such as during a supplier failure, when refunds and replacement costs are already eating into their working capital.
A high chargeback rate can push operators into a card scheme monitoring program, such as Visa's VAMP or Mastercard's ECP. This can trigger fines, and, in the worst case, losing the ability to accept cards at all. Schemes generally start treating merchants as high-risk when disputes creep towards 1% of transactions.
Chargeback prevention starts with clarity and evidence:
Offering fast and fair refunds directly is usually cheaper than a chargeback, which carries fees and counts against your ratio even when you win the dispute. Fraud screening at the point of sale, which we explore in more detail below, reduces the number of fraudulent chargebacks significantly.
Close monitoring of your chargeback ratio by reason code tells you whether the problem is fraud, service quality or process, so you can fix the actual cause.
However, there is a category of chargeback that no amount of good service can prevent: the chargebacks that follow a supplier failure, where the cardholder is entitled to their money back and the failed supplier cannot repay you. This is where risk transfer really matters.
Supplier failure insurance for merchants and acquirer chargeback insurance for acquirers exist because chargebacks are a structural feature of the sector rather than a performance problem you can fix.
Find out more: What is Supplier Failure Insurance and How Does It Work?
Merchant insolvency carries two risks: the risk that your own business fails and cannot meet its obligations, and the risk that another merchant in your chain fails, leaving you or your acquirer holding liabilities that can no longer be recovered.
When a customer pays by card, the acquirer is ultimately liable to the card schemes for that transaction. If the merchant later cannot deliver and chargebacks happen, the acquirer reverses the payments and passes the cost back to the merchant. If the merchant is solvent, they pay. If the merchant is insolvent, they can't pay and the acquirer absorbs the loss.
If your own business is at risk, insolvency exposure shapes how your business operates before any actual failure occurs. It drives the reserves acquirers demand and the terms you are offered, and money tied up as financial security for acquirers can’t be used to pay suppliers or grow your business.
If a partner fails, the impact is immediate and, more often than not, severe. We'll use the example of a tour operator whose main accommodation partner collapses mid-season. Under the Package Travel Regulations, the travel organiser must still deliver the holiday or refund customers, or they must source alternative accommodation (at very short notice and usually a premium).
This is happening all while the operator has no way to recover the deposits they already paid the supplier. A single significant supplier failure of this kind can quickly drain the working capital of what was a healthy operator, through no fault of its own.
For your business's own resilience, you need to focus on financial stability. That means healthy cash reserves, sensible use of customer money and a clear separation between working capital and funds that must be used for future trips.
When a travel business fails, two parties are exposed at once. You, the merchant, have a legal duty under the Package Travel Regulations to protect your customers' money. Your acquirer, on the other hand, has to fund the chargebacks that follow, but they have no way to recover them from the insolvent business.
Leaving the acquirer's exposure unaddressed will lead to higher reserves, higher fees or tighter terms, as the acquirer moves to protect itself. You end up covering that exposure either way, but leaving the acquirer's exposure unaddressed means paying more on terms you did not set. This situation is avoidable if you address both exposures together from the start. To benefit from better terms, choose cover that meets your regulatory obligations and reassures your acquirer at the same time.
Where your business's failure is a concern, financial failure insurance protects your customers and meets your Package Travel Regulations obligations by refunding and repatriating travellers if you become insolvent. The cover steps in when the business ceases trading, taking on the refund and repatriation costs that would otherwise fall on the company or its administrators.
The policy can also be extended to include your acquirer, so one policy answers both your obligation to customers and their exposure to your failure. That is what earns better terms, rather than the terms an acquirer will impose if left to cover itself.
Find out more: What is Financial Failure Insurance and Why Do Travel Businesses Need It?
Another way to cover the acquirer's side is for the acquirer to hold its own protection. When a travel merchant becomes insolvent, its future chargebacks can no longer be recovered and the acquirer absorbs the loss. Acquirer chargeback insurance is designed to mitigate those merchant-insolvency chargebacks, so the acquirer can keep its portfolio resilient and trade with you on more competitive terms.
Whether you bring your acquirer into a financial failure insurance policy, arrange a bond that satisfies their conditions, or the acquirer takes out chargeback cover of their own, the goal is the same: to meet your regulatory obligations to customers without leaving your acquirer financially exposed.
Find out more: Acquirer Chargeback Insurance: Protecting Payment Institutions From Merchant Default and Dispute Risk
Where a bond is still required, whether by a regulator, trade body or commercial partner, bonding solutions provide the security you need. Bonds can be written to meet your Package Travel Regulation obligations, to satisfy merchant acquirer conditions or to secure trade association membership, so bonding answers both your obligation to customers and your acquirer's terms.
Bank bonds require collateral, which ties up working capital. Insurance-backed bonds, on the other hand, require an in-depth financial review to assess the travel business's risk before the premium is set.
Find out more: The Complete Guide to Travel Bonds
Supplier failure insurance protects you when a contracted supplier, such as an accommodation provider, becomes insolvent. It covers the costs you are now liable for:
Find out more: Supplier Failure Insurance: Essential Cover for Tour Operators and Travel Agents
Scheduled airline failure insurance addresses the same problem on the aviation side. Airlines collapse with little warning, and replacement airfares usually cost more than the original tickets. For operators selling air-inclusive packages, supplier failure and scheduled airline failure cover work together: one protects the ground suppliers, while the other protects the flights.
Find out more: What Is Scheduled Airline Failure Insurance (SAFI) and How Does It Work?
Pipeline funds insurance protects the revenue you're owed when an intermediary in your payment chain fails. If they collect customer money and cease trading before passing it on, this cover protects inbound funds that would otherwise be trapped in an insolvent company while you are legally required to deliver trips.
Find out more: What Is Pipeline Funds Insurance and Why Do You Need It?
Travel payments are prime targets for fraud because bookings are often high-value, international, delivered in the future and easy to resell. The scale of fraud companies are dealing with today is immense, with UK payment fraud losses reaching £1.3 billion in 2025.
Criminals use card details to book trips online, and they initiate small test authorisations through booking forms to find which stolen numbers still work. This type of fraud is largely prevented by 3D Secure, velocity rules, fraud scoring and device fingerprinting.
Criminals trick customers into transferring money to an account the criminal controls. This type of fraud is countered with educating customers on this type of fraud, clearly communicating payment requests, implementing Confirmation of Payee (CoP) to be sure the destination matches the intended recipient and using AI and machine learning transaction monitoring.
This is when legitimate customers dispute charges they authorised. The best way to counter it is to use clear billing descriptors when taking customer payments, providing detailed order confirmations, asking customers to actively accept terms and conditions and documenting all communications with customers.
Criminals seize customer accounts to use stored cards and loyalty balances. This type of fraud is prevented by strong authentication, monitoring for unusual login and booking behaviour and reverification before high-value purchases.
Criminals book using a stolen card, claim they overpaid, and then request a refund to a different account (their own bank account). Travel providers can avoid this type of fraud by providing customers with clear return and refund policies that cover the circumstances where refunds or returns will be accepted and enforce same-account refunds only.
These common fraud methods have a huge cost for travel businesses. There's the direct loss of the service and the funds, the chargeback and its associated fees and the after effects of the fraud and chargeback metrics the card schemes monitor. Left unchecked, fraud threatens merchants’ ability to process customer payments.
There's no one method that'll stop your business being the target of fraud, but a layered approach goes a long way to fighting the problem:
Settlement is how the money for a card transaction reaches your account, moving from the cardholder's issuer through the schemes and your acquirer to you. A settlement failure is any breakdown in that chain, such as delayed funds or lost funds because an intermediary failed before they could pass the funds to you. For a travel business that depends on steady cash flow to pay suppliers, settlement failures do real damage.
Settlement failures can happen for a few reasons. A payment institution in your chain becomes insolvent while holding your funds, or perhaps an acquirer suspends settlements over a risk concern.
The travel sector adds another layer of complexity to the payment settlement process, because money often passes through intermediaries, platforms and agents before reaching the end recipient. Each handover is another possible point of failure.
Settlement failures are a pipeline funds problem. If an intermediary collects £25,000 in customer payments six months before departure and stops trading before they've passed the funds on, the merchant is still legally obligated under the Package Travel Regulations to deliver the trip.
However, they're now £25,000 short at the worst possible moment, as that money was going to be used to deliver the promised services. And, to add insult to injury, there's no realistic route to recovering the funds from the insolvent intermediary.
Settlement risk cannot be eliminated entirely, but travel businesses and the institutions that serve them can bring it down substantially through several measures:
Confirm that those you are planning to work with have the financial strength and regulatory standing to safeguard your funds. Assess their financial stability using public records, verify their corporate registration, review their litigation history and commit to ongoing monitoring to make sure they remain a reliable partner.
The longer money spends in transit and the more hands it passes through, the more exposed you are to a delay or a failure. Working with providers that settle locally in your core markets, rather than routing payments through an international chain, means fewer funds are delayed or lost.
Purpose-built insurance cover means that if the worst happens, you're not going to lose out financially. Travel businesses might opt for pipeline funds insurance to protect the revenue they're owed, while card issuers may take out card issuing settlement cover, which steps in when expected settlement funds fail to arrive through counterparty default, late settlement or disruption in the chain.
A reserve is the money your acquirer holds back from your settlements as security in case of future liabilities. Travel is treated as high risk, so reserves are a common financial risk reduction mechanism for acquirers, and they claim a slice of your working capital you have already earned: typically 5% to 15% of your gross sales.
Chargebacks and refunds normally come out of your live merchant account. The reserve is the acquirer's fallback for when the account doesn't have sufficient funds to cover them, which in the most serious case is when the account is closed because the business has failed.
Reserves come in different shapes and sizes:
A cash reserve is only one of the tools an acquirer can use to reduce financial exposure. The main forms are:
How much security an acquirer asks for, and in what form, comes down to how much of a financial risk they deem a business to be. When they're making their assessment, they look at several factors:
How much an acquirer holds back reflects the risk it sees in the business. Lower that risk and the next time the reserve is set, you might not have to hand as much money over.
A lot comes down to good housekeeping – that means keeping transparent accounts, making sure liquidity is healthy, using several suppliers and keeping your chargeback ratio as low as possible. Each of these steps strengthens your case for lighter terms.
Because the reserve mainly exists to cover the chargebacks that would follow if your business failed, insuring that exposure removes much of the risk the reserve was set up to cover. A financial failure policy extended to your acquirer reduces the risk they are taking on, and supports lighter reserves and better terms.
Above your acquirer sit the card schemes, like Visa and Mastercard, whose rules and processes govern whether and on what terms you can accept cards. Card scheme exposure is the risk that your chargeback and fraud levels breach their set thresholds, as this triggers monitoring programmes and fines.
In the most serious cases, merchants may lose the ability to accept cards altogether. For a travel business relying heavily on card payments, that last outcome is existential.
The Visa Acquirer Monitoring Program (VAMP), which came into effect in April 2025, was a big change to fraud and disputes, merging the two into a single ratio. Merchants above the ‘excessive’ level are penalised, with the threshold now set at 1.5%.
Mastercard's Excessive Chargeback Program (ECP) consists of two tiers. The first tier is Excessive Chargeback Merchant (ECM), and merchants enter this tier when they receive 100 or more monthly chargebacks and their ratio exceeds 1.5% for two consecutive months. If chargebacks then exceed 300 per month and their ratio goes beyond 3%, they are placed into tier two: High Excessive Chargeback Merchant (HECM). Merchants are fined based on how long they sit in these tiers.
The consequences of these monitoring programmes escalate quickly. First come fines and per-transaction charges, then come heavier reserves as the acquirer responds to the higher risk. At the end of the line is every merchant's fear: termination and a possible MATCH listing that would make it near impossible to find an acquirer willing to give them card payment capabilities.
Steering clear of card schemes' monitoring programmes comes down to careful management of fraud and chargebacks:
The risks we've explored rarely arrive one at a time. A supplier you rely on fails, chargebacks quickly follow and ratios start to climb towards scheme thresholds, tightening your liquidity at the time you need it most.
These risks share the same origins. In travel, customers pay long before the trip happens, bookings are high-value and made online, and payments can pass through many hands before the trip is delivered. And that's why one policy rarely protects a travel business properly. Cover has to be layered at each point of exposure, and it has to fit how your business actually operates.
This is the work TMU Management does – we start by mapping your exposures across the entire payment chain, then build protection around them. That might look like:
None of this is off-the-shelf cover. Our approach is driven by expertise and insight, and we work with you to design cover that aligns with your regulatory obligations, your operational model and your commercial priorities.
You can't remove payment risk from travel entirely, but you can manage it well. To see where your exposure sits and how to close the gaps, contact the TMU Management team.
If you need insurance that reflects how your business really works, TMU Management is here to help. Our team will assess your challenges, understand your exposures and design a bespoke solution that fits your strategy.
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