Andy Downman is director at digital payments specialist Adflex
As corporate travel continues its
recovery, new challengers in the market are seeing opportunities to gain ground
on traditional players through value added services and technologies like
virtual cards and straight-through processing (STP) that help them compete on
price to win new business.
Reigniting an entire industry was
never going to be easy and even now, airline staff shortages, lingering Covid
restrictions, and the rising cost of doing business loom large over the
industry.
This uncertainty leads to
complexity. And for payments, it leads to significantly more complexity.
Corporate travel payments have never been simple: TMCs handle payments to
multiple third parties, often with different airlines, trains and taxis, hotels
and travel insurance brokers. Each of these parties may take payment in
different currencies and deal in different languages. Throw in customers that
want to change or cancel their booking, and you have an administrative
nightmare, costing time and money.
Payments for travel services can
take up to 90 days to process, presenting significant cashflow challenges, leading
to an increased chance of a chargeback if circumstances change. Is it any
wonder that so many travel companies reference B2B payments as a significant pain point?
At the same time, acquiring banks,
looking to protect their own assets, continue to red-flag travel payments. The traditional
approach of using a credit card to book travel led to unprecedented volumes of
chargeback claims made since the pandemic began.
Consequently, in some cases acquiring
banks have suspended onboarding new TMCs; they simply can’t take the losses anymore.
In other cases, banks are asking for holding deposits, or delaying settlement,
to protect their assets. For SMEs in the travel space, this just adds to serious
cashflow headaches.
Adversity breeds innovation – first
stop, security
This dash for cash means payments are
a key differentiator. It is crucial for TMCs to be paid on time, and to create
accounts receivable (AR) process efficiencies that ease day-to-day costs of
running a business. Accepting virtual commercial cards – a rapidly-created digital
credit card issued by employers, through which employees make business
purchases – is one way to achieve this. It enables corporate customers to pay quickly,
while accessing an upfront line of credit to protect cashflows.
During the pandemic, new players
came to the market fresh with modernised practises and started on level terms
with incumbents. A tech-first approach led to better margins, giving them the
ability to offer competitive prices to customers.
This is achieved partly by
reducing lengthy accounts payable (AP) processes. TMCs that can accept
commercial cards through a cloud-based gateway, managed by a payments
processor, no longer need to commit resource to calling and emailing customers to
chase up payments, and logging invoices manually.
Another disruptive technology in
this sector is payment links, where a TMC sends a link to a customer in seconds
(via email, text or electronic invoice), taking them to a hosted pay page. As
the TMC never needs to see or handle a customer’s card information, this helps
reduce the security compliance burden (PCI-DSS), often with the added benefit
of reducing merchant service charges and the cost of card acceptance.
Online transactions hosted on a
payment gateway are seen by regulators as more secure than traditional methods
as they need to be compliant with SCA (Strong Customer Authentication) in
Europe. This can be achieved by leveraging security features like EMV 3-D
Secure, which enables customers to seamlessly authenticate themselves with the
card issuer when making online purchases.
For returning customers, the third-party
payment processor can securely store card details to avoid unnecessary repeated
data entry steps. The result? A far easier, quicker, simpler process for
customers, reducing barriers to subsequent purchases.
Data is the differentiator
With businesses (cautiously)
re-entering the world of corporate travel, the more information a TMC can
offer, the more reassured customers will be. Enhanced travel data that can be
passed between providers on a trip not only helps align logistics, but can help
the buyer reconcile travel expenses.
More information is critical to businesses
knowing exactly what is being spent on travel, when and where. This helps with
tax, as receipts are tax evident in some cases, but also with budgeting. Faster
payments provide a more accurate view of cashflow and enable better long-term travel
budgeting. Automated reporting can feed into a business’ internal approval
process to ensure travel purchases are signed off quickly.
Modernisation isn’t just restricted
to long distance travel either; train and taxi companies are also expected to
accept card payments, adding value to customers by offering instant digital
receipts that are easier to share with their finance department and help
compete with the likes of Uber.
B2B travel is far from its
final destination...
...but it might arrive in a better place than before. The pandemic has driven a shift
towards cloud-based payments. APIs (application programming interfaces) present
a way for two interfaces to exchange information and in business travel, such
integrations enable merchants to pick and choose how they want to accept
payment. More importantly, these platforms also give control to the buyer,
overcoming both security and cashflow issues thanks to an up-front line of
credit, boosting and maintaining good business relationships.
Digital payments innovation has accelerated
out of necessity. Online purchases are the norm. Previous fears around long
development lead times are now alleviated by quick API integrations. A TMC’s
payment acceptance gateway can be set up in mere hours, with little to no
business disruption. The pace of business travel payment now matches the pace
of our digital lives elsewhere.
We may be returning to 'business
as usual', but it’s evidently a 'new normal'. Successful TMCs will be those who
act fastest, using modern processes to drive internal efficiencies that create
the margins needed to provide customers the best deals and ensure profits take
off once again.