MCC 3000–3299

Airlines

Applications

Decisions

Identities

Transactions

Underwriting Cheat Sheet

In the complex world of payment processing, understanding the nuances of Merchant Category Codes (MCC) is crucial for both merchants and financial institutions. MCC codes 3000–3299 are specifically designated for airlines, encompassing a broad spectrum of air transportation services. This guide from Gratify offers an in-depth exploration of these MCC codes, providing valuable insights into their characteristics, associated risks, and best practices for managing merchant relationships in this sector.

Typical Business Types

MCC Codes 3000–3299: Assigned exclusively to airlines, covering domestic and international carriers.

Passenger Flights

Scheduled and chartered flights for travelers.

Cargo Transport

Shipping goods domestically and internationally.

Ancillary Services

Baggage fees, in-flight purchases, seat upgrades, and loyalty programs.

1. High Level Information for Payment Processors
2. Key Risks and Concerns
3. Common Fraud Signals
4. Underwriting Tips
5. Example Scenarios and Red Flags
6. Common Underwriting Questions
7. Ongoing Monitoring

High Level Information for Payment Processors

Transaction Types:
- High-Value Transactions: Significant amounts due to the cost of airline tickets.
- Prepaid Services: Payments made well in advance of service delivery.
- International Transactions: Cross-border payments involving currency conversion.
Common Payment Methods:
- Credit and Debit Cards: Predominant method for purchasing tickets.
- Digital Wallets: Increasing use of platforms like PayPal, Apple Pay, and Google Pay.
- Alternative Payments: Use of loyalty points or travel vouchers.
Unique Business Characteristics:
- Future Delivery Risk: Services are often delivered weeks or months after payment.
- Regulatory Compliance: Must adhere to aviation regulations and international laws.
- High Chargeback Potential: Due to cancellations, delays, and customer disputes.

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Key Risks and Concerns

Fraud Risks:

Card-Not-Present (CNP) Fraud: High risk associated with online transactions.
Stolen Credit Card Usage: Unauthorized purchases leading to chargebacks.
Friendly Fraud: Legitimate customers disputing charges to obtain refunds.

Regulatory Challenges:

International Regulations: Compliance with varying laws in different jurisdictions.
Data Security Standards: Adherence to PCI DSS and protection of sensitive customer data.
Sanctions and Embargoes: Risks associated with operating in or with restricted countries.

Chargeback Triggers:

Service Disruptions: Flight cancellations or delays causing customer dissatisfaction.
Billing Errors: Incorrect charges or failure to apply discounts/promotions.
Misrepresentation: Discrepancies between advertised and actual services.

Common Fraud Signals

High Frequency of Purchases: Multiple tickets bought in quick succession with the same payment method.

Last-Minute Bookings: Purchases made shortly before departure, a common indicator of fraud.

Mismatch in Customer Data: Differences between billing information and passenger details.

Unusual Travel Patterns: Bookings for flights to or from high-risk areas not typical for the cardholder.

Multiple Payment Attempts: Several declined transactions before a successful purchase.

Underwriting Tips

Verify Licensing and Credentials: Confirm the airline holds all necessary aviation licenses and certifications.

Assess Financial Health: Review audited financial statements to gauge stability and risk exposure.

Evaluate Chargeback History: Analyze historical chargeback ratios and dispute resolution effectiveness.

Review Fraud Prevention Strategies: Ensure robust measures are in place to detect and prevent fraudulent activities.

Understand Business Model Nuances: Recognize seasonal trends, booking patterns, and industry-specific challenges.

Set Appropriate Reserves: Establish reserve requirements to mitigate potential financial losses.

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Example Scenarios and Red Flags

Spike in Chargebacks Post-Promotion:

An airline runs a discounted ticket promotion, followed by a surge in chargebacks, indicating possible promotion abuse or dissatisfaction.

Multiple Bookings with Declined Cards:

Numerous attempts to purchase tickets with different cards from the same IP address suggest fraudulent activity.

Unusual Routing Patterns:

Bookings for circuits or illogical travel paths may indicate credit card testing.

High Volume of International Transactions:

Sudden increase in international sales without a clear business reason could signal fraud.

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Common Underwriting Questions

Business Operations:
- What types of airline services do you offer (commercial flights, charters, cargo)?
- How long have you been operating in the airline industry?
Financial Practices:
- What is your average ticket price and monthly transaction volume?
- What is the ratio of domestic to international sales?
Risk Management:
- What fraud detection and prevention measures are implemented?
- How do you handle cancellations, refunds, and customer disputes?
Regulatory Compliance:
- How do you ensure compliance with international aviation regulations?
- Are you compliant with data security standards such as PCI DSS?
Customer Service:
- What channels do you provide for customer support?
- What is your policy on chargebacks and refunds?

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Ongoing Monitoring

Continuous Transaction Analysis:
- Regularly review transactions for anomalies and adjust risk parameters as needed.
Compliance Audits:
- Schedule periodic reviews to ensure adherence to regulatory and security standards.
Merchant Account Reviews:
- Keep track of the merchant's performance metrics, including chargeback ratios and refund rates.
Update Risk Mitigation Strategies:
- Stay informed about emerging fraud trends and update prevention measures accordingly.
Customer Feedback Monitoring:
- Analyze complaints and reviews to identify potential service issues leading to disputes.
Proactive Communication:
- Maintain open dialogue with the merchant to anticipate and address potential risks.

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