Payment experts warn that too many tour operators and travel agencies are exposing themselves to unnecessary cancellation risk through outdated payment processes.
In 2020, cancellation rates well above 100% not only caused an existential crisis for travel companies envisioning a world without travel, but also caused them a short-term refund crisis that led to many of their them bankrupt.
How would many tour operators and travel agencies today face that same challenge if there were another global health emergency, catastrophe, extreme weather, or even a geopolitical event that prevented travelers from taking the international trips they had paid for?
The answer is that any tour operator or travel agency that pays their travel providers via bank transfers would have a very difficult time getting reimbursed, and unfortunately there are far too many of these.
Spencer Hanlon, Head of Travel at fintech provider Nium, comments:
"In such a catastrophic situation, the reality is that even refundable bookings may not be refunded, and if they are, payments could take weeks or even months. Of course , non-refundable bookings are going to be even more difficult to recover – in fact, some companies are still embroiled in legal action stemming from the March 2020 cancellations and may never see that money again.”
"But is there a way to manage or even avoid this risk? Fortunately there is in the form of virtual credit cards. Just as consumer credit cards offer the consumer much greater protection in the event that they do not pay a service, B2B virtual cards also protect travel companies.
"This means that if there were another wave of cancellations, it would be much easier to request a refund and, just as importantly, it would be resolved very quickly, meaning that tour operators and travel agents would have the money to back in their accounts in a matter of days, not years.
Virtual cards would also facilitate operational management in the event of mass cancellation, for example, by automating reconciliation. And from the point of view of daily activity, they also make a lot of sense: they offer controls that traditional cards or bank transfers do not offer, they allow much faster payments and, in addition, they are much cheaper.
In this sense, modern virtual cards offer the travel industry a similar level of technology and service that we all expect as consumers in the world of 2023. Meanwhile, traditional bank transfer payment methods remain anchored in legacy technology. of the seventies.