Why Merchant-Initiated Transactions (MITs) Lose Hotels Revenue

There are several ways a hotel merchant can capture payments when a guest isn’t physically present, but that doesn’t mean they’re all good ways to do it. Not all card-not-present (CNP) transactions are created equal, and Merchant-Initiated Transactions (MITs), where a card is processed without the cardholder present, can result in a lot of missed revenue for you.

Not only does the card issuer charge a higher processing fee for MITs; they’re also extremely difficult to defend in the case of chargebacks. Here’s why:

❎ Lack of Cardholder Authentication

MITs don’t require the cardholder to be present or to authenticate the transaction at the time of purchase. This makes it difficult to prove that the cardholder authorized the transaction.

❎ Lack of Documentation

MITs are difficult to tie back to signed documentation, like an event contract or authorization form, so you’re missing out on compelling evidence that the cardholder signed off on the transaction.

❎ Potential for Confusion and Dispute

Cardholders may forget about what they agreed to pay for, which can be exacerbated if the description of the charge isn’t clear in their credit card statement. This is more likely to result in them initiating a chargeback instead of a refund, and then the outcome of the dispute is no longer in your hands.
 

❎ Cancellation Difficulties

Canceling MITs can sometimes be complex or burdensome for cardholders. If they find it difficult to navigate cancellation procedures, they may initiate a chargeback instead of a refund.
  

❎ Regulatory Violations

Regulations governing MITs can vary by region and can be more favorable to cardholders, especially when it comes to chargeback rights. For example, some jurisdictions have stricter rules regarding recurring billing practices and require merchants to obtain explicit consent for each transaction.

We understand there are scenarios where you need to initiate an MIT, for example, when a cancellation policy precludes it. But if you do it via an advance deposit and a Cardholder-Initiated Transaction (CIT) process, you’re in a much better position to minimize the risk and impact of chargebacks. For more best practices, check out this post.