Merchant Category Code 4722 applies to travel agencies and tour operators arranging transportation, accommodations, and tour packages. This category involves advance bookings, cancellations, and third-party service coordination creating elevated chargeback risk.
Key Information
This guide addresses the complexity of travel merchant operations, where deposits, cancellations, and service delivery by third parties create unique payment processing challenges.
Typical Business Types
Travel Agencies
#1
Full-service agencies booking flights, hotels, car rentals, and complete travel packages.
Tour Operators
#2
Companies organizing group tours, excursions, and guided travel experiences.
Online Travel Platforms
#3
Digital marketplaces connecting travelers with transportation and accommodation providers.
Payment Processing Information
Transaction Types
1
Package Deposits
Advance payments securing bookings for future travel dates with balance due later.
2
Full Payment Transactions
Complete payment collected at time of booking for travel arrangements.
3
Installment Plans
Multi-payment schedules for expensive vacation packages booked months in advance.
4
Cancellation Fees
Charges retained when travelers cancel bookings subject to cancellation policies.
5
Supplier Payment Pass-Through
Funds collected from travelers and paid to hotels, airlines, and other service providers.
Common Payment Methods
Credit and Debit Cards - Primary payment method for bookings and deposits
Bank Transfers - Wire transfers for high-value international travel packages
Digital Payment Platforms - PayPal and similar services for online bookings
Travel Credit Cards - Cards offering travel rewards and protections
Financing Options - Third-party payment plans for expensive vacation packages
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IATA Accreditation - International airline ticketing certification where applicable
Data Security - PCI compliance for storing customer payment information
Common Fraud Signals
Bookings Inconsistent with Travel Dates
Large volume of bookings for immediate or past travel dates suggesting potential fraud.
High Cancellation Rate
Excessive cancellations compared to industry averages may indicate booking fraud or policy exploitation.
Geographic Payment Anomalies
Payment cards from countries that don't match customer location or travel destination patterns.
Example Scenarios and Red Flags
COVID Cancellation Surge
A travel agency experiences massive chargeback volume when pandemic restrictions force trip cancellations, exceeding reserve funds.
Third-Party Service Failure
Hotel closure or bankruptcy leaves travelers disputing charges to the booking agency despite funds already paid to supplier.
Cancellation Policy Disputes
Travelers filing chargebacks claiming they weren't adequately informed about non-refundable terms and cancellation penalties.
Booking Time Anomalies
Reservations made at unusual hours or with very short booking-to-travel windows suggesting stolen payment information.
Multiple Failed Payment Attempts
Several declined transactions followed by successful booking using different payment method indicating possible fraud.
Common Underwriting Questions
UW Tips Business
Verify travel seller registration and required state licenses
Confirm IATA accreditation if booking airline tickets directly
Review trust account arrangements for customer deposit protection
UW Tips Financial
Analyze booking patterns including average trip value and lead times
Review cancellation rates and reasons across different trip types
Assess cash flow management including supplier payment timing versus customer payment collection
UW Tips Risk
Examine chargeback ratios with focus on service delivery and cancellation disputes
Evaluate supplier relationships and financial stability of partners
Review customer authorization procedures for advance bookings
UW Questions Business
What types of travel services do you book and do you operate as agent or principal?
What is your typical booking lead time between reservation and travel dates?
What percentage of bookings are domestic versus international travel?
UW Questions Payments
How do you handle deposits versus full payment at booking time?
What percentage of transactions are card-present versus online bookings?
How do you manage funds between customer payment and supplier payment?
UW Questions Fraud
What fraud detection tools identify suspicious booking patterns?
How do you verify customer identity for card-not-present bookings?
What procedures address red flags like unusual booking patterns or high-risk locations?
UW Questions Compliance
Are you registered as a travel seller in all required jurisdictions?
How do you disclose cancellation policies and terms to customers?
Do you maintain trust accounts or financial security for customer deposits where required?
UW Questions Chargebacks
What is your chargeback ratio and what are the most common dispute reasons?
How do you handle customer complaints when third-party services fail?
What documentation do you maintain for proving service delivery?
UW Questions Infrastructure
What booking system do you use and how does it integrate with payment processing?
How do you manage supplier payment workflows and reconciliation?
Are your systems capable of handling multi-currency transactions?
Ongoing Monitoring
Transaction Monitoring
Monitor booking patterns for velocity and geographic anomalies
Track cancellation rates by trip type and supplier
Review chargeback timing relative to travel dates
Compliance Checks
Maintain current travel seller registrations and licenses
Ensure customer fund protection requirements are met
Stay updated on consumer protection disclosure obligations
Security Updates
Implement 3D Secure for online booking transactions
Use address verification and CVV checking for card-not-present bookings
Deploy fraud detection systems monitoring booking velocity and patterns
Risk Assessment
Adjust reserves during high-cancellation periods or crises
Review supplier diversification to reduce concentration risk
Monitor lead time trends affecting cash flow and risk
Merchant Communication
Provide guidance on managing chargebacks from third-party service failures. Share best practices for clear cancellation policy disclosure. Support agencies in navigating crisis periods affecting travel demand.
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