And how travel firms can change the equation
When acquirers assess payment risk in travel, their logic is rational. Airlines insist on being paid at booking, fulfilment may be months away, and if something fails, chargebacks follow. Travel merchants bear risk they cannot control, so acquirers treat the sector as high risk and protect themselves accordingly.
What is missing is not discipline, but perspective. The card ecosystem already contains a global, cross-industry risk mitigation mechanism: the card scheme chargeback guarantee. It exists to protect buyers when services are not delivered and is ultimately paid for by the service provider through scheme rules and interchange. In effect, airline failure risk is already insured at the scheme level. Yet this protection remains hidden in plain sight. Instead of leveraging it, acquirers default to blunt capital controls, behaving as if the safety net does not exist.
The default response: crude and uniform
When an acquirer sees a travel merchant, they see deferred delivery risk. A customer books six months out, pays today, but service is not delivered until departure. If something goes wrong, the acquirer faces chargebacks. Their response is automatic.
Acquirers withhold 10 to 20% of revenue in rolling reserves for 90 to 180 days, or demand fixed collateral upfront. In extreme cases, they retain 100 percent of funds until “wheels-up”, as reported by Travel Weekly.
Law firm Fox Williams notes that acquirers impose reserves “at the acquirer’s full discretion, without clear triggers or limits, leading to sudden and unpredictable demands”.
Industry averages replace actual risk assessment. A cruise operator booking twelve months ahead is treated like a low-cost airline selling three-week windows. Financially stable OTAs face the same reserve logic as early-stage startups. Precision is sacrificed for simplicity.
Why this shifts risk unfairly
Travel merchants carry risk they do not control. Consider a travel company selling £100 million in bookings. A 15% rolling reserve held for 180 days locks away £15 million in working capital, money that could fund marketing, negotiate supplier rates, or improve service.
The Thomas Cook collapse exposed how this becomes self-fulfilling. Travel Weekly has reported that acquirer holdbacks contributed to both Thomas Cook’s 2019 failure and Flybe’s 2020 collapse. When merchants are starved of liquidity as conditions tighten, protections meant to shield acquirers can accelerate the very failures they are designed to prevent.
Merchants do not set fuel prices. They do not control airline balance sheets. They do not trigger pandemics or regulatory shocks. Yet they pay upfront, in locked capital, for risks originating elsewhere in the value chain.
The data problem behind bad pricing
Acquirers rely on blunt instruments because they lack usable visibility. Traditional risk assessment depends on industry averages: average booking windows, average refund rates, average chargeback exposure. But averages obscure what matters.
An eighteen-month cruise booking can look identical to a last-minute hotel reservation in many risk models, despite radically different exposure profiles. Critically, payment data is rarely connected to fulfilment data or to when card-scheme liability actually expires.
Mastercard’s Travel and Entertainment Risk Monitor, developed with actuary.aero, demonstrates what becomes possible when those datasets are connected. By combining payment, booking and service data, it enables real-time views of exposure. As DECTA CEO Scott Dawson explains, this allows acquirers to “assess credit risk more accurately and release funds with greater confidence”.
The issue is not merchant behaviour. It is data integration. When acquirers understand exact periods between payment and departure, track booking changes, and know precisely when chargeback liability lapses, they can price risk accurately rather than defensively.
Structural alternatives: bounded risk, better pricing
Structural change starts by collapsing fragmentation.
Back-to-back issuing and acquiring brings customer payment acceptance and supplier settlement into a single, observable flow. Risk is no longer diffused across disconnected parties; it becomes measurable and enforceable within one system. Learn how combining issuing with acquiring creates a closed payment loop for travel transactions and improves control over settlement and risk exposure.
In merchant-of-record models, OTAs take customer payments and settle suppliers via virtual cards, aligning exposure with their operational window rather than carrying open-ended liability.
Platforms with integrated payment processing and analytics illustrate how this shift can occur. Nuvei highlights that travel merchants face elevated risk because of long lead times and chargebacks, and positions integrated payments, analytics and chargeback management as essential tools for managing that complexity. While this does not eliminate risk, it demonstrates how modern infrastructure can materially improve visibility and control across travel payment flows.
Safeguarding provides another structural lever. Instead of discretionary acquirer holdbacks, merchants place funds into regulated trust structures with fixed release schedules aligned to service delivery. Travel Weekly notes this provides greater transparency and allows funds to return sooner than traditional reserves.
Multi-acquirer strategies further distribute exposure. Post-COVID, acquirers began “demanding airlines bring in another acquirer to distribute risk or deposit significant funds”, according to CellPoint Digital.
Outpayce research shows that 38 percent of travel payments leaders already orchestrate cross-border payments, with a further 30 percent planning implementation. Among leaders, 40 percent identify orchestrating global flows as a top challenge and opportunity.
Why the current model fails
Skift research shows that 75% of travel companies earn over a quarter of their revenue from cross-border payments, exposing them heavily to reserve-based risk controls, while 90 percent of travel executives prioritise payment system upgrades.
This is not fashion. It is economic necessity. When double-digit percentages of revenue sit locked in reserves, when discretionary controls replace objective triggers, and when protections accelerate rather than prevent failure, the model has broken.
The path forward
The opportunity is not to price risk more aggressively, but to recognise and use the protection that already exists. Card scheme chargebacks were designed as conditional, scheme-backed insurance against non-delivery, funded through the economics of card acceptance. When acquirers ignore this mechanism, they effectively charge for the same risk twice: once through the scheme, and again through reserves, holdbacks and collateral. Structural change is not about inventing new protections, but about aligning payment architecture, data and settlement so that this existing insurance can actually be relied upon.
The tools already exist. The guarantees are already embedded in the card ecosystem. What is missing is the willingness to step outside legacy assumptions and use them.
For travel platforms looking to reduce acquirer reserves and gain greater control over settlement flows, integrating issuing alongside acquiring can reshape how travel payments are structured.
Download our guide on adding issuing to acquiring for travel payments to see how this architecture works.
