1、Why Travel Agents Should Adopt Virtual Cardsto Transform their Payment StrategyRead this e-book if you are an:Online travel agency“Bricks and mortar”agency Travel management company Any other travel intermediary (e.g.a bedbank)making B2B payments to hotels,airlines etc.Find out about the four main t

2、ypes of travel B2B payment;why virtual cards are the clear winner;and how to put together your B2B payment strategy.3The Travel Business:21st-Century Selling,20th-Century PaymentsThe travel industry is full of contradictions.Online travel agents,and even“bricks and mortar”agents,were the pioneers of

3、 e-commerce.They are totally cutting edge and digital in the way they sell and book travel.But,once agents receive payment from a customer,the way they forward that money to suppliers(like hotels and airlines)is often old-fashioned,non-digital and very inefficient:Bank transfers Airline settlement(l

4、ike BSP or ARC)Plastic credit card payments are all just like they were 25 years ago.4What is a virtual card?A virtual card is a 16-digit number just like the one you see across the front of a plastic credit or debit card.It also has(just like plastic cards)an expiry date and security number.But vir

5、tual cards are generated electronically and normally used for one transaction only.There is an up-to-date way to pay suppliers and its growing rapidly.Virtual cards are:QuickerCheaperAdmin-lightSaferMeet the Digital Way to Pay:Virtual CardsIt has been estimated that avoidable payment-related costs(l

6、ike time spent reconciling invoices with payment statements)eat up 20 per cent of the average agents profit margin.Suppliers are steering agents towards virtual cardsVirtual cards arent just a better B2B payment method for you as the payer.Theyre more efficient for the merchants you are paying too.V

7、irtual cards bring them their cash quicker and slash time spent on reconciliation and refundsRecent events have propelled virtual cards from“nice to have”to“essential”status.There are two main reasons:Travel agents can no longer afford payment inefficiencyTravel has always been a low-margin sector.S

8、ince Covid,those margins have been even tighter.Supplier payment is a huge yet well-hidden expense that,more than ever,can prove the difference between whether your agency makes a profit or a loss.The average hit to travel agency profit margin from payment processes(Source:Ixaris)20%5HOTELAIRLINECUS

9、TOMERTRAVEL AGENCYWhats In This E-BookThe payments world talks about the double loop of travel payments.When,say,a leisure traveler books a flight and hotel room through an online travel agent(OTA),there are two payment“loops”:The single payment made by the traveler to the OTA.The B2B payments the O

10、TA makes to the partner airline and hotel.This e-book is about the best way to make those B2B payments in Loop 2.We compare the four main types of travel B2B payment:Bank transfer(ACH,SEPA,SWIFT etc.)Airline settlement plan(BSP,ARC etc.)Plastic card Virtual card We show why virtual card is the clear

11、 winner.We explain how to put together your B2B payment strategy.LOOP 1 CONSUMER PAYMENTLOOP 2 B2B PAYMENTSACH Automated Clearing HouseSEPA Single Euro Payments AreaSWIFT Society for Worldwide Interbank Financial TelecommunicationBSP Billing and Settlement PlanARC Airlines Reporting CorporationJargo

12、n-buster:What are all those acronyms?Loop 1Loop 26How the Four Main B2B Travel Payment Methods CompareVIRTUAL CARDBANK TRANSFERAIRLINE SETTLEMENT PLANPLASTIC CARDSLow-cost cross-border settlementEasy dispute/refund processEasy to settle multiple transactionsCan pay almost all travel suppliersEasy re

13、conciliationNo need for financial bondingMaximises time funds are held in agents accountLow fraud ratePotential for rebate7B2B Payment Method 1:Bank TransferWhat is it?Transferring money directly from your bank account to the suppliers account,like ACH payments in the US or SEPA in Europe.Internatio

14、nal bank transfers are usually made with SWIFT payments.Whats good about bank transfer?+You can pay into any suppliers bank account anywhere in the world.+Direct costs are very low if youre transferring to an account in the same country.Whats bad about bank transfer?-Direct costs are very high if yo

15、u make an international transfer,including foreign exchange fees and unfavourable currency conversion rates.-Indirect costs are also very high.Its a manual,clunky,time-consuming process.-Reconciliation is a nightmare as a bank transfer usually covers multiple transactions.-The dispute and refund pro

16、cess is almost non-existent.Its hard getting your money back if the service paid for isnt delivered.8B2B Payment Method 2:Airline Settlement PlansWhat is it?The two main airline settlement plans are the International Air Transport Associations Billing and Settlement Plan(global),and Airlines Reporti

17、ng Corporation(for US agencies only).Settlement plans enable an agency to make a regular single payment typically 7 or 14 days to cover all tickets they have bought from scheduled airlines.Whats good about airlinesettlement plans?+Only one regular payment to cover multiple ticket purchases.+An estab

18、lished,reliable process.Whats bad about airlinesettlement plans?-Settlement plans can mainly only be used for paying“full service”scheduled airlines booked via a global distribution system.Low-cost and chartered carriers are excluded,and you still need a way to pay hotels,car rental companies,cruise

19、 lines etc-The settlement plans often require agents to apply for International Air Transport Association(IATA)accreditation and to lodge bonds or other expensive forms of collateral.-The dispute and refund process is weighted heavily in favour of airlines,and failed badly when flights were cancelle

20、d at the beginning of the Covid crisis.-Reconciliation of agency bookings with settlement paperwork is time-consuming.9exchanges between issuers,acquirers,processors and so on.Agents know their payments will be accepted.Suppliers know they will be paid.Trusted Dispute Process Card rails run in both

21、directions.If service isnt delivered,agents know they can get refunded through a well-established dispute process.LiquidityFor a low-margin sector like travel,well-managed cashflow is vital.Cards extend how many days agents keep money paid by customers until settlement has tobe made.At the same time

22、,the merchant(the supplier accepting the payment)is assured of payment within two days of transaction authorization.By far the most popular form of B2B payment for travel agents is cards.The ecosystem that supports card payments is known in the payments industry as“card rails”,and travel glides alon

23、g those rails quickly and ultra-smoothly:UniversalTravel is a global business.Card rails also run globally,allowing travel suppliers anywhere to be paid by travel agents from anywhere.Visa and Mastercard,for example,are both accepted in more than 200 countries and territories.ScaleToday,you can pay

24、almost any travel supplier anywhere in the world with a card.Visa and Mastercard both handle thousands of transactions per second.ReliabilityCard payments are incredibly reliable despite the huge volumes and complex Goodbye foreign exchange fees!You can buy globally but settle locally in the currenc

25、y of the merchant you are paying.B2B Payment Method 2:Why Travel Card Rails 10B2B Payment Method 2:Some Cards Are Better Than OthersPlastic CardsAll card formats benefit from running along card rails.But that doesnt mean all card formats are equally good.For B2B travel payments,you essentially have

26、two choices:Both run along the same rails but plastic cards are like a 20th-century diesel train:theyll get you there eventually but slower and less efficiently.Virtual cards are the 21st-century electric replacement:fast and frictionless.Heres the difference between them.Virtual Cards11B2B Payment

27、Method 3:Plastic CardWhat is it?The agency keeps a plastic card in the office to pay suppliers invoices or transaction-by-transaction.Whats good about plastic cards?+All the benefits of card rails described above.+There may be some personal loyalty rewards for the cardholder.Whats bad about plastic

28、cards?-You are dependent on the currencies and card products your bank can provide,which typically are not very flexible.-Fraud becomes a major risk when you hand over the same card details to merchants around the world.If your card number,security code and expiry date fall into the wrong hands,you

29、face financial losses and disruption to your business.-Transaction data provided in card statements is very limited,making it an admin nightmare to reconcile them with Average number of hours per week a travel agency with 12 employees spends on payment processing.(Source:Ixaris)201225%The estimated

30、improvement to profit margins for travel agents by switching tovirtual cards.(Source:Ixaris)The average annual saving for a 12-person travel agency through getting rid of manual reconciliation.(Source:Ixaris)B2B Payment Method 4:Virtual CardWhat is it?The key advantage of virtual cards over plastic

31、cards is that every payment can have its unique card number.One number,one payment allows you to do so much more.Whats good about virtual cards?+Highly automated You can call up a virtual card via a seamless API as part of your regular booking and admin process.+Complete control One payment,one numb

32、er lets you set unique controls for each transaction,including specifying the maximum cost,the merchant(or merchant category)and when payment is made.+Goodbye manual reconciliation!The unique card number can instantly match every line item on a supplier invoice with every line item on your payment s

33、tatement.Virtual card reporting can be uploaded directly into your back office.13Even more thats good aboutvirtual cards+Goodbye fraud!With a unique number,and controls on where,when and how much is spent,fraudsters cant use the card.+Versatility Virtual cards can be used with any merchant that acce

34、pts cards.They also work well both for pre-paid bookings or reservations where payment is taken at check-in or check-out.And the ability to make any card type-credit,debit,pre-paid etc.virtual cards maximises your funding choices.+Improve your liquidity Virtual cards are a treasurers dream.Customisi

35、ng the payment date can maximise the time money stays in your account between payment by your customer and forwarding funds to the merchant.+Flexible payment for a constantly changing world You can change authorisation for when payment is made if,say,the date of a flight is moved.+Understand your bu

36、siness better With a unique number,and controls on where,when and how much is spent,fraudsters cant use the card.Whats bad about virtual cards?There really arent any disadvantages to virtual cards,except that its taken a while for the travel industry to understand this new,better way of paying.But a

37、wareness has improved hugely.14Why Covid19 Made Virtual Cards Even More CompellingTravel merchants want you to use virtual cards Covid has woken up merchants to the benefits of virtual cards too,often for similar reason to agents:Payment by card means they get paid quicker:within two days after you

38、make payment.Compare that with airline settlement,where they only get paid 24-48 hours after the agent has cleared funds with the Airline settlement plan which can cause at least a weeks delay between services booked and payment made to the merchant.For hotels,the difference is even bigger.With a vi

39、rtual card they receive funds 24-48 hours after payment authorization,whether pre-paid or at check-in.Compare that to bank transfer,where they must wait to the end of the invoicing and settlement periods.That could easily be 45 days.Merchants can also potentially make forex savings by charging and s

40、ettling in local currency using virtual cards.The ultra-low fraud risk of virtual cards protects merchants too,and prevents them from having to go through the payment cycle again.Maximise your liquidityKeeping cash in the business for as long as possible has never been more important and virtual car

41、ds do exactly that.They let you delay paying the merchant until the transaction due date and even then,you dont settle with the card company potentially for several weeks.Maximise your profit marginNo travel business can afford unnecessary inefficiencies any longer.Boost profits by minimising forex

42、fees,reconciliation costs and fraud.Adopt a refund process that worksAirline settlement processes failed amid the pandemic.With flights being cancelled daily,reconciliation and refunds became extremely difficult.In contrast,virtual cards let you claim refunds via the card dispute process if the merc

43、hant fails to refund for a service that has not been provided or has been changed.The whole travel industry sees virtual cards as the futureWho believes virtual cards will become an essential payment method?Travel agents 94%Hotels 90%Airlines 86%(Source:Amadeus)15Create a Winning B2B Travel Payment

44、Strategy For Your Agency Switch to virtual cardsVirtual cards drive benefits to your profits,business processes and payment experience helping with liquidity,cost reduction,fraud elimination,control,an end to manual reconciliation,and more.Find the right virtual card providerIts essential to shop ar

45、ound because what different providers offer varies hugely.If you choose a general bank,like the one your company does most of its banking with,you will likely receive a very limited“vanilla”product.If you choose a travel sector specialist provider that understands your business,choices will be wider

46、 and more focused on your needs.What your virtual card provider should offer Check if the provider offers a range of currencies so you can opt for local settlement with your suppliers and avoid heavy conversion costs.Make sure the provider offers a range of card types,including debit,credit,pre-paid

47、,both Visa and Mastercard options,and a choice of interchange fee levels.Check the provider gives you fully flexible controls for each individual card,especially control over when payment is released to the merchant.This is crucial for boosting liquidity and minimising fraud.By finding just one prov

48、ider which can cover all your payment needs,you ensure the lowest payment processing costs each time and maximise potential card 16Create a Winning B2B Travel Payment Strategy For Your Agency How a multi-currency strategy works Lets say you are a global OTA,based inthe US,that books hotels and other

49、 suppliers in Thailand.You also have customers in Thailand.The aim is to retain money you are paid(in Thai baht)by your Thai customers to pay Thai suppliers in other countries.Give your payment costs more attentionAs we mentioned earlier,as a travel seller you can improve profits by an average 20 pe

50、r cent if you get your payment strategy right.Its worth investing a little more time and resource to achieve that kind of profit uplift.Ways to develop your expertise include:Researching the topic more Talking to other companies in your sector Engaging with suppliers to understand their view on paym

51、ents Hiring a payment specialist Hiring consultancy supportManage your currenciesReduce costs and risk by minimising how much money you move across borders.Using a virtual card provider which holds funds in your suppliers main currenciesis a big step in the right direction but theres much more you c

52、an do,especially if you have customers based in multiple countries.By introducing virtual cards,you can make big savings if you redeploy the people who previously spent time on manual payment reconciliation to manage your currency strategy instead.Make sure your own technology supports a smooth virt

53、ual payment processTalk to your agency middleware and other providers to ensure you can call up a virtual card via an API and seamlessly integrate it into the booking,payment and fulfilment process for each transaction.Automate as much as you canIntegrate your virtual data reports into your back off

54、ice to maximise automation of the reconciliation process.17Want to know more?Switching your travel B2B payments to virtual cards can make a massive difference to the success of your business.Nium/Ixaris is a long-time specialist in virtual cards for the travel sector,offering a full range of card types,schemes and currencies,and all the necessary know-how to go with it.To find out more contact us and schedule a conversation.CONTACT US