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Can you trust or subject to higher-than-normal levels of fraud and
chargebacks. However, high-risk designation isn't
your bank? restricted to what is broadly referred to as "vice," and our
own clients who deal with being deemed risky are from
more mundane sectors. For example, the travel and tourism
industry is also subject to high fees and stricter limits on
chargebacks for reasons that airlines, travel agencies, tour
operators and ticket comparison sites largely can't control.

Airline tickets and hotel reservations are high value,
and since they are digital, they are easy to transfer
anonymously. A fraud network can use stolen or synthetic
identities to purchase tickets and sell them for very high
profits, which will in turn cause a chargeback when the
person whose identity was stolen discovers the unwanted
charge on their card.

Travel fraud is big business: one fraud network alone made
$1.2 million in illegal sales in the first nine months of 2021,
and fraudulent websites cost the industry $1 billion per
year. The airline industry reportedly saw a 530 percent rise
By Bob Kaufman in cybercrime incidents during the COVID-19 pandemic,
ConnexPay and this has yet to abate (see https://tinyurl.com/5n784fms).

t the time of this writing, it's hard to say wheth- The travel industry is also subject to what is termed "future
er the ramifications of the collapse of Silicon delivery risk," which is the risk that one party might not
Valley Bank, First Republic and Credit Suisse fulfill their side of an agreement once they have been paid.
A are truly over. The rising interest rates that While in most industries a customer deals directly with
were blamed for the banks' failures are still present, and the company that supplies the product they are buying,
opinion is split on the causes of the collapses. Principally, the travel industry has more middlemen, such as travel
the era of cheap loans that has underpinned much of the agencies, tour operators and flight comparison sites.
21st century so far is ending.
This means that if you were to buy a flight through an
Companies are increasingly worried that the banks that online travel agency and the flight was canceled, the
should provide a solid foundation for their business may travel agency would have to issue a refund. Because
either be structurally flawed or not working in their these intermediary companies don't have any control
best interests. This concern is particularly acute across over exogenous events like flight cancellations, financial
companies and industries that banks typically view as institutions are wary about them, leading to increased
"high risk." They know that if their bank has problems, fees that they pass on to the merchant.
then they will be the first to suffer from higher fees or
restrictions.
The truth is, although there are undercapitalized banks
like SVB, the majority are conservative by nature, (see
https://tinyurl.com/ye269fsz). The likelihood of any bank Recent articles published in The Green Sheet that mention fallout from
disappearing with their clients' money is low, and we Silicon Valley Bank's failure include:
have seen both recently and in 2008 that governments are
willing to pay staggering amounts of money to bail out • "Bankrupt acquiring bank !#* What’s an ISO to do under the
banks. law?" by Adam Atlas, April 10, 2023, issue 23:04:01

However, when there is unrest in the economy, banks • "Crypto's lingering winter chill," by Patti Murphy, April 24, 2023,
become even more conservative to limit risk and thereby issue 23:04:02
avert a scenario in which they are undercapitalized. So,
what can companies do to protect themselves from banks • "Navigating through turbulent times," by GS Advisory Board
turning against them during uncertain times?
members, May 22, 2023, issue 23:05:02
'High risk' sectors

Many sectors pay a premium for banking and card
processing because they are either in legal gray areas

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