Debit Memo Working Group Convenes for Spring Meeting

ARC’s Debit Memo Working Group (DMWG) met May 8-9 in Alexandria, Virginia, for its first in-person meeting of 2017, where members engaged in productive breakout sessions to work through the details of the group’s latest initiatives. With a renewed focus on fare filing issues and industry best practices, the DMWG is making significant strides in its effort to reduce debit memos.

Current State of Debit Memos

Although most U.S. carriers saw a decrease in debit memos from 2015 to 2016, the number of debit memos in the U.S. increased 7.1 percent—amounting to one memo for every 305 tickets issued through ARC. The dollar amount of memos, however, increased by just 1.7 percent.

In January 2017, the first set of standardized debit memo reason codes, established by the DMWG, was implemented in Memo Analyzer for nine airlines. ARC has completed the mapping of nine additional carriers and is in the process of mapping eight more, all to be included in Memo Analyzer by the end of the year.

A report from ARC’s Credit Card Working Group covered some recent initiatives in payment technology, including 3D Secure, which has now become more streamlined as part of the customer experience and is helping to curb online fraud.

The group also discussed the proliferation of EMV (chip-enabled) credit cards, which have increased security in card-present transactions. However, this has led to a shift of fraud to card-not-present transactions, namely to online vendors, putting many in the travel industry at an increased risk of fraud.

Chargebacks Still an Industry Challenge

Credit card chargebacks remain the single largest source of debit memo dollars issued, representing 34 percent of dollar volume and 17 percent of the debit memo count in the U.S. in 2016. There was some good news in 2016, however — while the count increased by 7 percent from 2015 to 2016, the dollar value declined by 6 percent.

A report from IATA determined that chargebacks are also the leading reason for debit memos internationally, confirming the need for increased fraud awareness and prevention globally.

“Fighting chargebacks is like fighting a forest fire,” said Shelly Younger, manager of settlement services for ARC. “You think you have it under control for a while, and then they flare up again. ARC spends a significant amount of time dedicated to identifying chargeback trends and educating the industry on how to identify credit card fraud. We also work to improve the chargeback management process, collaborating with the credit card companies and processors on finding ways to reduce fraud.“

Agents also shared instances of chargebacks, in which a client may dispute a charge to the credit card company because they didn’t receive a refund. In these instances, when a ticket is nonrefundable, it is especially important for agencies to document that the cardholder agreed to the terms and conditions of purchase.

“In terms-and-conditions-related chargebacks, to attempt to reverse the chargeback, the agent is encouraged to provide supporting documentation demonstrating that the terms and conditions of the sale were disclosed and accepted by the cardholder,” said Jennifer Watkins, director of payments for ARC. “This can be challenging when the transaction takes place over the phone, but for an OTA this can be done through a ‘Click to Accept’ check box on the payment page.”

Clarifying Fare Filing

In a dynamic conversation with representatives from ATPCO, airlines, agencies and other key industry stakeholders, the DMWG worked through specific issues surrounding fare filing, namely to determine which issues the group should continue to pursue.

For the issue of “free text,” which describes certain ATPCO categories where airlines can enter custom text, agents often see issues with inconsistent, and even contradictory, fare rules. This issue is compounded by the fact that global distribution systems’ (GDSs’) auto-pricing tools, which many agencies depend on for accurate ticketing and fare guarantees, cannot interpret free text. The DMWG determined that this issue is one it would like to continue working on—so long as the group can bring together individuals who work in fare filing at the airlines and collaborate on best practices for this issue.

The group also discussed the impact of ticket designators on Fare Calculation Mode Indicator (FCMI) codes. When an agency is required to use a ticket designator, the FCMI code changes from auto-priced to manually priced, which no longer qualifies agents for the GDS fare guaranty. Members of the DMWG agreed that, ideally, the addition of a ticket designator would not result in a shift to manual pricing. But until that changes, many would like to see airlines eliminate the requirement to use a ticket designator. The group agreed that the issue is one they would like to continue pursuing.

Agencies and carriers also see issues that stem from ATPCO Category 33 (voluntary refunds): Because this category doesn’t allow for automated text, many carriers file free text in category 16. This issue is on ATPCO’s project list but has not yet been prioritized. The agents, carriers and GDSs of the DMWG agreed to collaborate with ATPCO to raise awareness around the issue and determine whether it can be prioritized.

Finally, the DMWG revisited problems with consistency in ticket refunds: They noted that there are instances in which a fare is refundable, but the carrier-imposed fees (YQ/YR) are not. The DMWG agrees that data should be pulled to determine the scope of the issue as well as next steps.

“It is no secret that resolving and reducing debit memos is not an easy endeavor, which is why it is so amazing to see the DMWG continue its enthusiasm and positive attitude toward this complex and, in many cases, very charged subject matter,” said Younger. “Debit memos touch everyone in the chain in some way, shape or form: the agency, airline, global distribution system, ATPCO, the corporate market and the passenger. The DMWG’s strength is its broad range of industry participants with a singular goal — to eliminate debit memos.”

Prioritizing Best Practices

Throughout early 2017, the travel agencies, carriers and GDSs of the DMWG met independently to draft suggested best practices for the debit memo process. Each group addressed the five portions of the debit memo “life cycle”: Pre-debit memo communications and training; auditing and debit memo issuance; debit memo research, communication and response; debit memo settlement and payment; and post-debit memo communication and training.

The DMWG worked in small groups to review the lists of suggested best practices to find commonalities, as well as singular suggestions that would be especially beneficial to the industry.

Key themes in the discussion included:

• Improving agent training to increase accuracy and awareness of issues that could lead to debit memos
• Enhancing communication between airlines and travel agencies throughout the debit memo process
• Creating centralized, regularly updated sets of policies and resources
• Establishing suggested timelines for memo issuance, communication and resolution
• Centralizing communication and payment within ARC’s Memo Manager platform
• Utilizing automation when possible in order to reduce the likelihood of error

The DMWG will continue working through the best practices and plans to finalize a set of industry best practices by this fall.

Next Steps

The DMWG will continue meeting regularly by phone to continue working through best practices and fare filing issues this year. The group will reconvene in person on October 18, prior to ARC’s fourth annual TravelConnect conference.