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Spencer Hanlon - Finance Digest │ Financial Literacy │ Financial PlanningBy Spencer Hanlon Global Head of Travel Payments and Head of Europe at Nium

It’s no understatement that the travel industry has undergone exceptional turbulence since the start of the pandemic. The financial impact of COVID-19  upon the industry has been severe with a $4 trillion loss in global GDP for the years of 2020 and 2021 projected by a recent UNCTAD report. However, now more than a year and a half into the COVID era, travel in some areas of the world is re-emerging with vaccinations allowing travel between certain destinations to become easier. As the travel industry looks towards a recovery, and moving beyond the disruption of COVID, it is an opportune time to embrace digital transformation that can streamline and help make more robust organisations in this sector. For travel, one particular area where progress can be made is in payment strategies.

Online travel agents have traditionally acted as leaders in embracing e-commerce technology through offering and curating a digital experience for their customers as they booked their holidays. However, while the user experience may be leading edge, other areas of technological development in the industry have stagnated. This is especially true of the back-end processes involved in forwarding payments to suppliers, such as hotels and airlines. Indeed, dated systems, which are both inefficient and costly, are estimated to diminish as much 20 per cent of travel agency profit margins.[1] In an era in which fintech has revolutionised the way companies do business and interact, there is no reason for travel agents to lose substantial amounts in avoidable financial processes, such as reconciling invoices with payment statements.

In a time of international pandemic, travel agents can simply no longer afford payment inefficiency. Travel is a traditionally low margin sector and disruption caused by COVID-19 has tightened these margins further. Supplier payments are as significant of an expense to be the difference between a travel agent making a profit or a loss. Therefore, it is crucial that the industry streamline these payments through digital transformation. One key way in which this can be done is through the use of virtual cards in facilitating B2B travel payments – virtual cards serve as a highly automated solution that offers complete control and removes the need for labour-intensive manual reconciliation.

Traditional payment methods create exorbitant cost

For the travel industry, many traditional methods of facilitating payments can result in significant cost. For example, bank transfers – where money is directly transferred from an agent to a supplier – are very costly. This is because of the international nature of travel operations, where foreign exchange fees and unfavourable currency conversion rates are often incurred. Adding to these costs are the indirect expenses resulting from the time-consuming, manual process of bank transfer payments. Furthermore, reconciliation complexities typify bank transfer processes, as a transfer can cover several varying processes.

Another process through which travel payments have been facilitated is airline settlement plans. These plans allow an agency to make a regular single payment covering all tickets that have been purchased from a scheduled airline. This process is also not ideal for agents, as it often mandates that agents apply for International Air Transport Association (IATA) accreditation and also lodge bonds or other expensive forms of collateral.

Lastly, there is the use of plastic cards as a traditional payment solution. In the travel industry, plastic cards carry a considerable risk of fraud, as they are passed between multiple vendors across the world. Plastic cards are rendered even less ideal for travel agents because they are dependent on the currencies and card products supported by the bank issuer – these are typically inflexible and are opaque when it comes to transaction data, causing administrative headaches for reconciliation statements against supplier invoices.

From bank transfers to airline settlement plans and plastic cards, each of the traditional payment processes bring select faults that make them costly for implementation in the travel industry. This has cleared a space for virtual cards, which will allow travel agents to maximise profits and efficiency surrounding the payments process.

Streamlining travel payments with virtual cards

A virtual card is similar to a plastic and debit card in that it has a 16-digit number, an expiry date and security number. However, virtual cards are generated electronically and are typically used for a single transaction. The pandemic and digital transformation have transformed the worth of virtual cards from a luxury to a business-critical technology in the travel industry. Not only do virtual cards facilitate merchants receiving funds more efficiently, but they streamline reconciliation and refund processes.

The pickup of virtual cards as a transformative payment strategy allows travel agents to wield a highly automated service within which they have complete control. For example, by using a single number for any transaction enables select controls to be placed upon payments as determined by their nature – such controls could range from specifying the maximum cost, the receiving vendor, and directing when the payment is scheduled to be made. Unique card numbers also instantly match every line item on a supplier invoice with every line item on the payment statement, removing the need for manual reconciliation. Virtual card reporting is uploaded directly into the back office, further streamlining procedure. In fact, the estimated improvement to profit margins for travel agents switching to virtual cards is 25 per cent.[2]

A key aspect of travel agents adjusting to a world redefined by the pandemic lies in the importance of liquidity and cashflow. By remaining dynamic, travel agents are poised to meet fresh challenges, as well as take advantage of quickly changing markets and circumstances that now dictate the travel market.  Optimising B2B payments reduces risk, makes processes more efficient, and can help  streamline a customer’s journey. After a year and a half of pandemic, customer expectations have changed in that travellers now expect services to be highly flexible. A streamlined B2B travel payments strategy can ensure that travel agents are well positioned to profit from a renewed upswing in international travel, while also providing the best quality of service at the lowest business cost.

Spencer Hanlon

Spencer Hanlon is Global Head of Travel Payments and Head of Europe at Nium, a leading embedded fintech company that provides banks, payment providers, and businesses of any size with access to global payment and card issuance services via one API.

In his role, Spencer is instrumental in developing strategies to optimise and help shape the future of B2B travel payments. His experience in travel payments spans over 25 years, with a decade at British Airways followed by 16 years at AirPlus International and ten years at Ixaris. Spencer is a qualified management accountant (CIMA) and beneficiary of living and working in over 19 different countries during the course of his childhood and career to-date.

About Nium

Nium is a leading embedded fintech company that provides banks, payment providers, and businesses of any size with access to global payment and card issuance services via one API. Its modular platform enables pay-outs, pay-ins, card issuance, and banking-as-a-service.

Once connected to the Nium platform, businesses can pay out in more than 100 currencies to over 190 countries – 85 of which in real time. Funds can be received in 33 markets, including Southeast Asia, the UK, Hong Kong, Singapore, Australia, India, and the US.

Nium’s growing card issuance business is already available in 32 countries, including Europe (SEPA), the UK, Australia, and Singapore. Core to Nium is its licence infrastructure, built over time in some of the fastest growing economies. Nium owns the broadest licence portfolio, covering 11 of the world’s jurisdictions, enabling seamless global payments and rapid integration, across multiple geographies.

For more information, visit:

[1] Source: Ixaris

[2] Source: Ixaris

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