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How to ‘Check-out’ Chargebacks

How to ‘Check-out’ Chargebacks


Abdullah Abdelkafi


26 Nov 2019

Read time

6 Minutes



Chargebacks have found a prime market within an industry that is left openly vulnerable to attacks via its mode of operations.

The hospitality industry is considered to be one of the fastest-growing contributors within the payment solutions market, with the rise of chargeback culture acting as a considerable catalyst to this movement.

Worth $570bn USD (£442.6bn GBP) globally in 2017, the hotel industry specifically, has seen comparable growth in gross bookings over an 8 year period, from $116bn (£90bn GBP) to $185bn USD (£143.6bn GBP). However, with various booking channels and modes of payments used to drive revenue; these are exactly the avenues in which chargebacks accumulate.

Whilst some chargebacks can be successfully fought, the risk to a hotel’s ability to process is greatly jeopardised alongside the non-negotiable nor refundable fines, charged by banks for the claims in the first place.

The reasons why a chargeback might be filed lead from dissatisfaction to criminal fraud, with reservation systems being one of the easiest ways for a fraudster to test a balance.

However, the remaining reasons are as follows:


As mentioned, one of the easiest ways for a fraudster to test the balance of a stolen card is to place a reservation through it and charge it back to the bank.
As chargebacks are notoriously hard to defend, and still not without cost (as we’ll get into) it is only one particular area of chargebacks that are successfully defended most of the time.

Not Showing Up:

Customers may book a room, and at the last-minute, make a decision not to turn up. Regardless of the reason, the loss of revenue will fall back on the hotel when it is most convenient for a customer to file a chargeback.

Payment Issue:

Failure to properly authorise payments can lead to chargebacks. In the instance where either the merchant is at fault or friendly fraud has been committed; failure to verify the identity or the cardholder, or alternatively, where a designated user of the card makes a booking without the cardholder’s knowledge – can lead to these claims.

Payment Expectations:

Deposits that customers do not realise they will be charged additionally for, may lead to chargebacks.

Delay in being charged:

Hotels may choose to take payments according to a schedule that suits them. However, a delay in charging guests can be both frustrating and confusing to the customer who had previously allocated funds. When the typically large fee for the booking is taken late, customers may chargeback the cost out of being unable to recognise the charge or being unable to budget for it.

Forgetting to cancel reservations

Guests may make a reservation in which they will pay a fee or deposit – or even pay for the cost of a room upfront – only to book another room at a better cost; to then find that when they are charged for the first booking, they had forgotten to cancel it, and issue a chargeback to resolve the issue.

The Hotel appears under a different name:

Hotels are often owned under large conglomerates or chains and will appear under a different name on a bank statement. This results in an onslaught of chargebacks that can either be intentional or cases of friendly fraud; wherein the customer did not intend to go past their initial enquiry of ‘cardholder does not recognize’ with the bank.

Whilst defending a chargeback is often a lost cause, 92.6% of these defence claims are won when evidence was provided to clarify the hotel’s identity. However, despite recovering their lost revenue, Hotel’s will not recover the chargeback fine against them charged by banks, nor the mark against their processing record which, down the line, can ultimately affect their right to process at all.

No 3D secure:

With no 3D secure elements in place in the checkout flow, fraudulent or multiple transactions can be put through that inevitably lead to checkouts without a 2-factor authentication process.

Unexpected charges or damages:

When a guest makes a booking, they may forget or not realise that it is not inclusive; and a movie-on-demand, mini bar or other hotel service has been added to the top of their booking fee. Alternatively, if the hotel determines that there are damages to be paid, this can add additional costs to the bill that they do not recognise and will chargeback.

Customer dissatisfaction:

Filing a chargeback for customer dissatisfaction can often fall under the reason code 4853 (MasterCard), otherwise known as a ‘not as described’ chargeback claim.

As chargebacks are often filed by 96% of dissatisfied customers who fail to raise a complaint with merchants, there is a significant call for resolutions.
However, within this sector a chargeback is more likely to be claimed out of convenience, falling in line with the popularity of friendly fraud over criminal acts.
The time in which customers have to file a chargeback can extend up to 6 months depending on the service provided. Considering a hotel’s revenue, this can lead to a whole new threat to the industry in false positives and perishability – where fraudsters also take up reserved spaces meant for valid bookings.

The hotel sector has seen continuous growth for the last 10 years, and whilst new measures have been taken to protect against chargebacks and fraud across e-commerce, the unshakeable business model for the hospitality sector means that large and small chains alike still lay vulnerable to attack.


Alternative and compliant payment methods:

Offering alternative payment methods such as Apple and Google Pay ensures that a payment is already 2-factor authenticated, and identifiable. Using payment terminals can instantly detect out of date cards and financial discrepancies to expand the already improved customer service solutions implemented to negate chargebacks in the industry.

AVS Checks:

Used in CNP transactions, an address verification check is used at the time of purchase to verify whether the address details entered, match those registered with the issuing bank. This is a common fraud preventative tool.


A refund always carries fewer consequences than a chargeback; which not only costs a hotel revenue but a fine from the bank.

Customer service 24/7 365:

Uninterrupted access to customer services to help resolve issues for customers, may help prevent chargebacks from being raised in the first place.

Billing descriptors:

Making sure a hotel is clearly identifiable on a bank statement will help reduce the number of ‘do not recognize’ chargeback claims.

Clear policies:

Clear policies on what a guest is charged for and at what stage of their stay, should be clearly stated in the booking confirmation.

Record Keeping:

Hotels should keep clear records in order to fight any chargeback claims or manage any issues before they can escalate to a chargeback.

Total Processing:

Total Processing’s payment gateway offers customisable fraud parameters to allow hotels to take payments, tailored to specific authentication elements.

To learn more about fighting chargebacks in hospitality contact Travis Henry at: [email protected]


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