The travel industry is making a remarkable recovery, with the European Travel Commission forecasting that 2024 will see international tourism in Europe exceed pre-pandemic levels. As the sector rebounds, Online Travel Agencies (OTAs) and Travel Management Companies (TMCs) need a robust and efficient payment infrastructure to manage payments to the multiple travel suppliers and partners they work with to fulfil bookings.
Over the past year, the financial services industry has increasingly focused on virtual card technology. Major card networks, like Mastercard® and Visa, are partnering with fintechs and banks to facilitate virtual card transactions to support travel agents, by simplifying the process of managing supplier payments.
In our previous blog Virtual cards: Transforming B2B payments, we discussed the challenges businesses generally face when managing employee expenses and supplier payments. We explored how virtual cards can be a more convenient alternative for these B2B payments, as they offer greater efficiencies, security, and transaction visibility.
This blog will explore the use of virtual cards in the travel sector, particularly for OTAs and TMCs such as Ayruu, and how they can solve industry-specific challenges, such as back-office reporting and reconciliation, to support secure and cost-effective supplier payments.
B2B payments for travel agents: What are the challenges?
The travel industry faces numerous payment challenges due to the high volume of transactions and parties involved in each booking.
- The limitations of traditional payment systems don’t cater to the needs of OTAs and TMCs, who work with multiple suppliers, and require automated payment systems that can efficiently handle high volumes of transactions.
- Reconciling large amounts of payments, with little to no visibility of transaction details, is a manual and time-consuming task for finance operations teams.
- Card processing costs at scale, currency conversion fees, and multiple parties involved in every booking significantly impact profitability for OTAs and TMCs.
- In case of refunds, regular wire transfers make the process slow and complex for travel agents, who must provide IBAN or account numbers to suppliers for reverse payments.
- Making payments at scale increases the risk of fraud, especially for the online travel industry where card-not-present (CNP) transactions are at its core.
- Cash flow management remains a challenge without proper visibility of account and transaction activities.
What are virtual cards and how can they assist in B2B travel payments?
Virtual cards, also known as Virtual Card Numbers (VCNs), are electronically generated cards that can be configured for one-time use, with a unique 16-digit number for each transaction, or set for a specific time frame or number of payments. This flexibility makes them invaluable for travel agents.
The digital nature of virtual cards allows them to be seamlessly integrated into the backend of OTA and TMC workflows. The API-driven systems enable the programmatic delivery of the card details such as PAN and CVC which can then be used to make the payment.
One of the standout benefits of virtual cards is their ability to enhance cash flow management. Travel agents can make supplier payments with virtual cards that are linked to a master funding account, which is set up with an Account Number or IBAN, and where corporate funds are pooled.
Moreover, virtual cards provide a layer of security and control that traditional payment methods often lack. By allowing programmatic creation of one-time use cards for precise amounts they help minimise the risk of fraud as a new VCN is generated each time.
The popularity of virtual cards is skyrocketing, with transaction volumes expected to reach 175 billion by 2028, rising from 36 billion in 2023. This growth reflects their critical role in facilitating efficient, secure, and flexible payments. For OTAs and TMCs alike, virtual cards are not just another tool for payment - they are a strategic asset that supports streamlined operations and enhanced financial control.
Simplify travel payments with Edenred Payment Solutions
Edenred Payment Solutions has been supporting, for over 15 years, businesses across industries to simplify their supplier payments through a secure, cost-effective, and remunerative Mastercard virtual card solution.
Travel agents can easily adopt our virtual card solution in a few simple steps:
Step 1
A master funding account, that can handle GBP or EU payments, is issued to your company. You can top up this account with funds allocated for paying suppliers using the Account Number and Sort Code or IBAN, with Faster Payments In (FPS) or SEPA Credit Transfer (STC) from an external bank account.
Top tip
Use different cards to manage spending with multiple suppliers, for example airlines and hotels. If you are a larger travel network, you can create separate funding accounts, with a unique IBAN, enabling each travel agency to manage their account autonomously, including making payments.
Step 2
You can easily integrate virtual card payments into your booking software using our RESTful APIs. During integration, developers can configure the payment flow to generate cards, with no limits to the number of cards that can be created. They can set up parameters such as how and where cards can be used, by pre-selecting from Mastercard Merchant Category codes (MCCs), such as “Transportation” or “Air Carriers”.
To simplify reconciliation, you can decide whether a new VCN should be created for each payment, or assign a virtual card to a specific supplier for a period of time or a number of transactions.
With these controls in place, the threat of fraud can be minimised by up to 30x, making virtual cards a safer and more convenient alternative to traditional card payments.
Top tip
Virtual cards can also be created to handle multiple currencies, making it easier to pay suppliers in their local currencies, whilst you avoid the 3% fee typically charged by banks and card networks for global transactions.
Step 3
Once the virtual card is created, it can be used immediately to pay suppliers. As the card is linked to the master funding account, it will automatically draw funds from it.
Check out this in-depth article to learn more about how this innovative funding model works.
As we issue Mastercard virtual cards, your supplier can accept the payment just like a traditional card payment with no integration work required on the supplier side. To benefit from even more convenience, our virtual cards can be registered with the Global Distribution System (GDS), so you purchase flight tickets from major airlines.
When a trip is confirmed, a new VCN will be instantly generated, or if there is a virtual card allocated to the supplier, the system will utilise the designated virtual card to pay the supplier.
The entire process is executed automatically, reducing the manual workflow and risk of human error when processing payments.
Top tip
By working with Edenred Payment Solutions, you can also earn a share of card transaction volumes paid back to you in the form of a rebate.
Step 4
Our APIs make managing the virtual cards and the master funding account simple. Real time webhook notifications ensure that you can control the account balance efficiently by notifying you when funds reach a set threshold. You can choose how and where to receive the notifications, for example linking to an internal portal system. Via APIs, the virtual cards can be temporarily or permanently blocked if needed. And in case of refunds, suppliers can automatically process the payment without requiring account information.
With fast onboarding, comprehensive documentation, and a team of experts available to assist at every step of the way, we make implementation simple and straightforward, to help travel agents adopt a virtual card solution that enhances their workflow.
How our solution simplifies supplier payments for a modern travel company
Ayruu is an all-in-one business travel company. The team at Ayruu needed an efficient way to manage payments to their suppliers across France and Europe. Their ambitious goal was to eliminate 100% of expense reports and remove the need for travellers to submit additional claims. This required a comprehensive internal payment tool capable of handling all supplier payments, including city taxes and restaurant bills.
We worked together to design and deliver the ideal virtual card solution, enabling Ayruu to pay all their suppliers efficiently, while seamlessly reconciling company bookings. With a seamless implementation within Ayruu’s booking workflow, our solution eliminated the slow manual processes for check processing or wire transfers, and with single-use virtual cards the risk of fraud was significantly minimised.
As a direct result, Ayruu benefitted from an optimised cashflow with our e-money account that offers total funds control and can be topped up via SEPA. Ultimately, this integration not only streamlined supplier payments, but also supported Ayruu’s mission to simplify business travel for their clients.
In conclusion
In conclusion, the complexities of supplier payments in the travel industry, from managing high transaction volumes to navigating reconciliation challenges and combating fraud, present significant hurdles for OTAs and TMCs. However, virtual cards offer a convenient solution. By automating payment processes, enhancing cash flow management, and providing robust security measures, virtual cards not only address these challenges but also streamline operations and drive efficiency. As the travel industry continues to recover and expand post-pandemic, embracing virtual cards will be key for travel companies seeking to optimise their payment systems and maintain a competitive advantage.
Simplify your supplier payments with virtual cards
Talk to our team of experts to find out how you can leverage our expertise and tech infrastructure to make simple, secure and convenient payments to suppliers using virtual cards.
