This posting appears in Skift and provides a perspective on the pandemic’s impact on the travel industry, which has of course been the hardest hit of all major sectors. Mercator Advisory Group has covered this in a series of ongoing blogs about the effect of lockdowns on business activity and commercial payments. This piece is not specifically about corporate travel but covers the overall scenario, with particular emphasis on the refund issues and how legacy systems across the ecosystem have hampered the consumer experience.
‘The coronavirus pandemic is highlighting the deep fault lines in travel’s technology and workflows, shaking up, in particular, how hotels, airlines, agencies, and vendors handle payments….“The challenges airlines and agencies have faced in issuing refunds for canceled flights has especially called out significant problems in payments tech,” said Kristian Gjerding, CEO of CellPoint Digital, which offers payment services….Responding to the challenge, obscure tech companies aim to upgrade the ways travel suppliers connect with banks, next-generation financial services like Apple Pay and Alipay, vendors of operational software, intermediaries, aggregators, and travel buyers.’
One of the innovations the author points to is virtual cards, which may surprise readers who are familiar with the high growth rates in this payment type during the past 5 to 10 years, driven largely by the travel sector. However, the use of virtual cards has been more related to invoiced payables (both single use and lodged cards), and not generally part of the booking process, both for corporate and individual consumer travelers.
That is changing as corporate virtual cards are finding their way into wallets and travel procurement flows. The benefits to using virtual card accounts in the travel ecosystem is that settlement happens quickly (with STP it can be one day),it is guaranteed, and it typically has a low fraud risk. That’s good when potential business failures are dotting the landscape.
‘This issue matters because many credit insurance companies used to backstop travel transactions. But mass cancellations due to the pandemic have scared them off….“Some hoteliers were sending bookings to resellers and expecting payment at the time of check-in or check out while relying on credit insurance companies to guarantee that if an agency went out of business before the guest arrived the hotel would still get paid,” said Voxel Chairman Xavier Ginesta. “That’s changed because credit lines have evaporated. Now hotels want to ensure they can get paid in advance and that their tech and their contracts assure that in most cases.”…Cheaper tech has made virtual cards more appealing. For example, Mastercard will debut on July 17 five new lower pricing tiers for its wholesale travel program, a service for travel intermediaries and travel suppliers via Mastercard’s virtual account numbers.’
On the consumer side, the author goes on to cover non-card preferences among many individuals who are turning to mobile money and faster payment alternatives as they quickly grow across the globe. The article is worth a quick read to stay informed about the accelerated move towards digital that we have been tracking since the onset of COVID-19.
“From a consumer’s perspective, what matters is the ease of transacting without needing to go fetch your credit card our and type in 16 numbers on a small mobile device,” said Meador of Redeam. “Services like Apple Pay, Google Pay, PayPal, Venmo, Alipay, etc., have created an expectation of speed. The travel sector needs to keep pace.”
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
