hardly a new technology, virtual cards are poised to become a much more
dominant force in the payment sphere in the coming years.
projected that there will be 32 billion virtual card transactions
around the world this year, and by 2027 that volume will be more than 121
billion. By then, the United States alone will generate $71 billion in B2B
virtual card revenue, representing nearly three-quarters of total global
to Juniper Research report.
check-in is a common pain point for virtual card use, often resulting in guests
finding themselves unable to check in while front desk staff try to decipher
with using virtual cards for hotel payments is that the technology still has
not quite caught up with the process. The front desk gets the virtual card
information, but there is no way for them to decipher whether it is a virtual
card or a standard credit card. The fax machine, surprisingly, still is
frequently used to send authorizations, but depending on their training level, the
front desk employee might not even know to check for it there.
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To add to
the growing concern, COVID multiplied staff turnover, particularly among front desk
employees, which has further complicated the situation. Ensuring qualified replacements
and expertise were secured has remained a priority for the hospitality industry,
which continues to delay the industry’s move away from manual efforts and move
ahead with strategies that will elevate the industry of hotel payments.
to communicate with property management systems is “the first step in the right
direction” in easing the pain points around hotel virtual card use - something
that today is not easily applicable while navigating through multiple PMS
systems, across different brands and regions globally.
is achieved, buyers still need to work closely with hotel partners and other
suppliers to make the process as seamless as possible.
Challenges to virtual card adoption
other obstacles to overcome in hotel virtual card use. The card terminal at some
hotels, for example, might be set to the wrong merchant code, which would block
the virtual card from being used. And virtual cards configured only for hotel
stays can't be used for incidentals, which might leave guests surprised or
unprepared if they must provide a second card at check-in.
travel agency’s point of view, most of them acted as intermediaries, relaying
the consumer’s payment information to the hotels, airlines, car rental and
other suppliers that constitute an individual’s itinerary. But as the network of
suppliers continues to grow, this “pass-through” model has become riskier and
less frictionless for agencies.
reason, we see a growing number of travel agencies adopting the merchant of
record (MoR) model, where the travel agency collects the customer’s payments
for all services booked through them, authorizes the transactions and then pays
the individual suppliers tied to the booking.
agencies cannot afford the operational and financial drag of long settlement
periods, lack of financial protection and burdensome administrative processes.
Agencies rely on funds at a quicker pace. They were already faced with staying
relevant, and their cash reserves were critical due to the volatile times the
industry was facing.
While the change
was inevitable for hotels, COVID accelerated the shift. The MoR model
and digitization of B2B travel payments with virtual cards is step one. Virtual
card numbers are digitally generated, single-use card numbers that are accepted
everywhere traditional payment cards are accepted. But experience has shown
that there are still many countries and travel suppliers out there that don’t -
or cannot - accept virtual cards.
The needs of emerging markets
growth in the emerging markets like Africa, Southeast Asia and Latin America continues to
be a focus for the travel industry, travel suppliers need to adapt to their
preferred way of getting paid. The adoption of virtual cards is far less
developed, as digitization is just becoming a priority. Allowing the travel
suppliers like hotels, airlines, car rental companies and many others to select
an alternative next to virtual cards not only creates loyalty, but also removes
the hurdle they are currently facing by accepting virtual cards.
From a time-to-market
perspective, securing direct banking rails can delay a company’s deliverables. But
these payment rails are crucial, especially in the emerging markets where most
payment providers don’t have direct presence or visibility.
the pace is ramping up, this process takes time and money. Partnering with a strong
payment player in the emerging markets can speed your time to market in these markets.
The demand for global payment coverage is here, and the push to innovate is increasing
Some of the
best innovations seen in recent years have been in the combination of account-to-account
payments and the provision of working capital.
that analyze invoices have been deployed to highlight opportunities for early
payments to be made to suppliers. These payments are funded by a panel of
lenders ranging from traditional banks to new entrants. The faster payment
rails were once a commodity generating little revenue for anyone.
they're an enabler for several value-added service providers ranging from the
technology platform to lenders, new and old. If one of them doesn't win, none
of them wins.
this will not all happen overnight, as many factors go into the years of complexities
that have been built around this sector. However, the shift is here, and it
will not slow down. If anything, the need will quickly intensify.
embracing this approach in launching new payment products and pairing them with
our global payments’ highway. The products are built to enable us to work with
all parts of the evolving payments infrastructure.
instance, our approach to supporting business-to-business payment flows is not
simply to offer a one-size-fits-all solution. Issuers, acquirers, master merchants,
corporate buyers and suppliers could all leverage different modules of the card-to-account
product, and TerraPay has the appetite to collaborate with each party to solve
the needs of the end-users.
customer push and regulatory pressures are leveraging new technologies, which
are driving the continued growth of real-time payments. The demand for
real-time payments is here.
of the industry can vouch for the need to innovate in today’s labor-intensive hospitality
payments process. It’s key for the hospitality industry to prioritize and
navigate through all the payment pain points and forge ahead a path where innovation,
acceptance and real time payments can leverage the antiquated hotel payment processes.
change can be overwhelming, especially in an industry that runs on traditional
and conventional processes. However, it also raises excitement.
About the author ...
Koert Grasveld is vice president of payments at TerraPay.
Find out how how TerraPay can help you solve your
global payment needs by contacting the travel team via email