How to pay suppliers easily: Takeaways from the Destination Paid webinar

Checkout.com recently hosted a webinar that brought together a number of travel payments experts to explore how online travel agencies can pay suppliers easily and earn revenue.

Titled ‘Destination: Paid,’ the webinar delved into the use of virtual cards in travel as a flexible and agile way to move money from customers to suppliers.

It covered current trends and challenges in travel payments, connecting payments by combining acquiring and issuing, and the benefits of virtual cards for online travel agencies. These benefits include reducing costs, saving time and streamlining reconciliation, all of which represent a crucial advantage in the highly competitive travel industry.

The Panelists

Checkout.com’s David Finel led the discussion among a panel of experts in the payments and travel industries.

Webinar panelists: Javier Casas, Director of Solution Engineering, Travel at Checkout.com. Paul Van Alfen, Managing Director at Up in the Air. Diego Colmenar Ortego, Director Enterprise Partnerships, Travel at Mastercard.

Below, we’ve picked out the key takeaways from our webinar, giving you some of the insights that you can use to start streamlining your payments to suppliers and boosting your revenue today.

Trends and challenges

Paul Van Alfen, Travel Payments Strategist at Up in the Air, set the scene with a look at some of the trends and challenges in the sector.

Using the concept of a city transport map, Van Alfen presented the complex and interconnected world of travel payments, with individual lines to describe the main factors that play a role in the ecosystem including suppliers, intermediaries, technology, innovation, and, of course, B2B payments.

Van Alfen's analogy of travel payments as a city transport map as seen in the webinar

“Historically, account to account or passing through the consumer card was a very common way to move money between the end customer and the travel intermediary,” shared Van Alfen. Innovation in travel fintech has had an impact, but there’s still “a lot of uncharted territory to win.”

Finding the most effective way to pay the supplier is one of the most lucrative areas for embedding innovation. From routing transactions in the most cost-effective way to optimizing conversions and “making sure the money collected can be used for payouts without having to pre-finance transactions yourself”.

Van Alfen also shares how the majority of tickets used to be sold through travel agencies, but with the rise of ecommerce, roughly 50% of tickets are sold directly by airlines. It’s now a way more “fragmented landscape.” This has had all sorts of implications for payment strategy, such as how and when different parties in the chain receive payment, and the importance of working out a “good compromise that’s workable for all.”

Connecting travel payments

Javier Casas, Director of Solution, Engineering of Travel at Checkout.com talked about the role that virtual cards play in setting up an end-to-end payments flow that combines acquiring and issuing.

“Margins in travel are tight, making it crucial to find a payment partner that is able to simplify the complexity of travel payments whilst allowing you to take control of your treasury flows”, Casas explained. “By using a modern and modular payment platform, a travel agency would be able to optimize cash flow while avoiding treasury inefficiencies.”

Giving the example of the Checkout.com platform, Casas shared how a central stored value account acts as the connective tissue, holding money collected from incoming customer payments that can be pushed out to fund outgoing payments made through virtual cards.

How the Checkout.com platform can support travel businesses

For agencies, there are several benefits to this model such as reducing the time for the payout funding as much as possible, and reducing operational costs by digitizing payout operational processes. Finally, you can also benefit from easier reporting, increased security, and financial protection from the scheme rules and regulations.

By harmonizing the payment experience with the booking experience, “you can offer a seamless payment experience for the consumer and avoiding multiple charges or potential foreign exchange costs.”

While virtual cards provide greater security than traditional cards, Casas emphasized that you'll need a mechanism of dynamic controls that can prevent you over-expanding while defending against card misuse.

You can even define groups of controls that you can apply at any stage of the card's lifecycle. This gives you the required flexibility to apply changes if you detect fraud.

Making the most of your virtual card payouts

Diego Colmenar Ortego, Director Enterprise Partnerships, Travel at Mastercard, gave his top tips for making the most of your virtual card payouts.

The first is that you are improving your credit window. By this he meant that “instead of having to pay on day zero, when the transaction is happening, you will have a credit window in order to settle with that supplier.”

Additionally, by paying with a unique virtual card number (VCN), you simplify reconciliation,: “These kind of VCN solutions can easily be integrated within any backend system. Every time there is a reservation, there is a VCN that is generated for that specific payment and then everything is automatically reconciled and fully secure.”

On security, Mastercard apply unique controls per transaction: “We can customize every VCN that we are generating for a specific payment or for a specific merchant, making sure that that VCN is going to be only used for that specific payment.”

When paying with VCNs or credit cards in the travel industry, Orgeta explained “we need to make sure that the solutions and the partners that we are utilizing are adapted to this industry.” In this case, we are talking about global payment flows. Even if a travel agency is based in a specific country, their suppliers will be global, so they need to make sure that every solution that they are choosing is localized and optimized to pay suppliers in every geography.

Mastercard solves this with central issuance: “whenever an issuer has a Mastercard wholesale travel program license for one specific market, they can issue everywhere provided that the local regulations allow them to do that.”

Q&A

Viewers had the chance to quiz our experts at the end of the presentation.

If I want to grow my virtual card program, what are the best practices?”

In response, Ortega advised that you need to think beyond where you are right now and follow your customers. Van Alfen added that you also need to challenge legacy processes in the travel industry: “There’s still a lot of room for digitalization in a lot of areas in the travel industry and I think what we talked about today is that automation can really help streamline processes and make them more robust, more secure, and more effective.” Casas also reminded that it’s important to find “a good provider that can help you customize your card program for your provider needs, for your consumer needs, and for your use cases.”

What are the best practices for getting both full-service carrier airlines and low-cost airlines to agree to accept virtual cards?

“Typically, network carriers have a B2B payment policy where they stipulate their position towards the use of cards. So you need to make payments part of your overall commercial agreement - not only about compensating or incentivizing sales but also agreeing on the form of payment and making that part of the overall deal” recommends Van Alfen.

“In some cases, VCN payments are perceived as a regular method of payment and, on the supplier side, perceived as a cost that they need to bear”, Ortega adds. “But there are two things we need to tackle. The first is that, by bringing the right solutions to the table, we can provide the payers with the flexibility to optimize acceptance, meaning there is some sort of bilateral agreement between the payer and supplier to bring the cost to a point where everyone feels comfortable.”

“We also need to change this paradigm, on the airline side, that accepting VCN payments is only a cost, because it’s also an instrument that’s bringing value, not only to the payer, but to all parties.”

If you had a crystal ball, what do you see in the near future for the travel industry?

“We’ve already seen that hotels and airlines are becoming modern retailers,” answered Cases, “but they need to start offering more”. He wants to see them continue to optimize and digitize their processes, and expand their offering, either directly by using other providers they have an agreement with or by using virtual cards to pay providers they don’t have an agreement with. “It’s an easy way to expand massively,” he concluded, leaving our curious audience with food for thought on their next steps.

The above represents just a few key takeaways from the discussion, but there are plenty of other nuggets of wisdom to discover in the full webinar. Register to watch and find out more about travel payments and trends, the advantages of setting up end-to-end payment flows, and more.