Published on Thursday, August 11, 2011
High surcharges are just one payments pain point facing the travel industry, says Alex Mifsud, CEO of Ixaris
"The recent call from the Office of Fair Trading (OFT) for travel companies to clarify surcharges and potentially scrap debit card charges was certainly welcome, but what struck me was not only that travel agents and bookers generally use credit, rather than debit, cards but also that this issue is just one example of the payment challenges the travel industry faces.
What I don’t think many travel bookers and agents realise though, is that in order for companies such as Easyjet to advertise their ‘low cost fares’, they have to offer one form of payment that does not incur all the charges. For Easyjet, for example, charges are avoided when paying by Visa Electron.
However, there are still challenges with using these, or any kind of traditional card. As travel arrangements become increasingly bespoke and more bookings are made outside distribution systems, reconciliation of multiple transactions with actual orders is very difficult and sometimes cards are blocked as they trigger anti-fraud mechanisms when used repeatedly. There is also the issue of weak controls, of course, and the relative ease with which an unauthorised transaction could be made by inside staff and go unnoticed.
By using a ‘virtual’ card, businesses can get around these challenges and reap further benefits. A virtual card works just like a traditional card but is delivered on screen, electronically, instead of via a plastic card. It still has its own 16-digit card number, expiry date and three-digit security number, but because it’s delivered electronically, it happens in real time. With this system, a new card is created for each transaction and holds the correct value for each purchase. Because each transaction is a separate card, each has its own unique reference, the card number, which makes reconciliation far easier.
As all the types of cards that avoid charges can be created in virtual form, travel businesses have a real cost-saving and effective solution.
So while it’ll be interesting to see whether companies such as Easyjet do react to the calls of the OFT, those in the travel industry should take this opportunity to review payment processes on a wider scale."
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The recent insolvency of Low Cost Travel Group, one of the large players in the travel industry had a big impact on the travelers, hotels and all related players from both wholesale & retail arms. There were about 27,000 people on a holiday who had booked through the company comprised of a €200 million wholesale arm and €500 million OTA / retail arm.