Virtual cards have seen their profile rise in the travel industry over the past couple of years, as an increasing number of users become aware of their benefits. Advantages - including speedy creation, control over spend, ease of reconciliation and a reduction in the potential for fraud - have made the technology an attractive proposition for many.
Now, virtual cards are starting to be used in versatile new ways as the wider industry finds innovative solutions to improve the experience for the traveler on the ground. Below we explore some of the fast-emerging use cases for virtual cards for those on a trip, examining how they are being harnessed to improve the travel experience.
Airline disruption – new possibilities
While virtual cards are typically used for business-to-business (B2B) payments, consumers are now starting to see the benefits of the fast-evolving technology.
Challenges faced by airlines when issuing refunds during pandemic-induced disruption have been well documented. Airlines are accustomed to taking money in, but they aren’t set-up to send it back to passengers, especially at scale. Virtual cards can help.
Rather than issuing lots of vouchers that are hard to account for, or struggling to obtain passenger bank details for manual transfers, a carrier might choose to distribute virtual cards for the appropriate amount to travelers instead. The process can be instant – and much less resource intensive than previous solutions.
But real time disruption scenarios are where virtual payments really standout.
Today, the last flight of the day might be cancelled, leaving passengers stranded at a foreign airport. The airline has a duty of care to ensure they can travel and are accommodated in a hotel. For passengers, this is a stressful experience and airlines that manage disruption well have a chance to differentiate and build loyalty.
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Imagine if your airline alerted you to the cancellation with a message informing you a virtual card had been sent to your phone, allowing you to choose a hotel at your convenience. How much better than being informed you must queue for a voucher?
This seemingly simple change avoids passengers seeking out scarce airline staff at the airport who might be struggling to organize paper vouchers for hundreds of passengers heading to specific hotels. It also supports passengers to rebook their flight independently, further reducing pressure on call center and ground handling teams.
Similarly, travel insurers are often called upon to fund medical treatment, new travel options or to replace items during a trip, in emergency situations. Rather than refunding clients for their own money they spend upfront, the insurer might instead choose to distribute a virtual card to cover the pre-agreed costs involved to resolve the emergency.
This "cash to consumer" model will drive adoption of virtual cards in the coming years. Any situation where money needs to be distributed to people quickly and in a controlled manner can likely be improved with virtual payments.
Business travel – controlled spend
Virtual cards are also an increasingly valuable digital solution for out of office spending in corporate travel programs – replacing plastic cards that are under-utilized or not fit for purpose. They are perfect for areas within a corporate travel program where there are high volumes of reimbursement – areas where virtual payments technology can be used to digitalize and streamline a program.
They reduce the burden on employees to fund business expenses out of their own pocket. Virtual cards can also now offer a consumer experience in the business world, reducing users’ exposure to credit risk, while also offering businesses more visibility and reducing potential fraud.
You have complete control over how much funding is issued to a user. With a plastic card the limit can be many thousands of pounds and the cash can be spent on anything. With a virtual card, exact amounts can be issued for each trip, with limits placed on what it can be spent on, when and where.
There is also no need for a program of unnecessary cards to be managed. Currently everybody within a company can be issued a card, whether they need it or not, leading to waste and credit risk.
Virtual cards contribution to sustainability
Virtual cards are shaping up to be a key tool in the battle for sustainable travel – offering users the detailed insight into the carbon emissions of their trip. With compliance standards tightening – this information will become increasingly valuable to users.
As the most comprehensive overview of payments information, the data collected by virtual cards is the best way to accurately evaluate the carbon impact of a trip. Over time, this information will help shape decision making by companies and travelers to drive down emissions.
It works by drawing on industry recognized data sources to assign a carbon impact for a particular flight or hotel booking. Companies can then aggregate this information to monitor the carbon impact of their travel, while travelers can see the impact of their trip within the Conferma Pay app - encouraging behavior change.
In the short-term, travelers with the app will be provided with a carbon impact graphic so they understand the Co2 emissions of their trip. Longer-term, travelers and companies will be empowered to understand the Co2 impact of on-trip purchases like hailing an Uber or ordering a branded coffee, before they complete the payment.
Corporate travel in a digital era
The emerging trends above come in addition to more established uses. For business travelers, the use of virtual cards means there is no need to spend your own money on flights or hotels – a key selling point. They also remove the need to collect paper receipts and submit fiddly expense claims. Virtual cards can do all the work. Ahead of a trip, money can be allocated to a virtual card, downloaded to a mobile app and used as normal, allowing a user to make purchases using company funds.
In specific circumstances, virtual cards can even become a revenue generator for users. There are a number of high-volume, low-margin industries that have employed this strategy in recent years - a trend particularly apparent in the online travel agent (OTA) space.
Rather than passively referring travelers to suppliers to complete payment, many OTAs have decided to adopt the ‘merchant model’. This sees them accept the payment from the traveler, before making a business-to-business payment to each of the suppliers involved. As the OTA is pushing so much money through its banking partners, they are able to attract significant rebates, typically in the range of one-to-three per cent.
The above examples are merely an overview of how virtual cards are impacting on the world of travel. As the technology matures, we expect to see many more innovative applications rolled out in the coming years. Watch this space!
About the author...
David Wood is chief product officer for Conferma Pay