Four reasons why credit is given too much credit | eNett

May 5, 2016

Over the last few years the travel industry has seen rapid and dynamic changes. There are new economic and competitive pressures, business models and technologies that are prompting travel companies to change their business practices to better match the new landscape. 
 
However, one area which is often overlooked by travel companies is payments. Credit is the default choice, whether that’s lodge cards, company credit cards or customers’ personal cards. But in today’s travel landscape, do the benefits of credit really stack up when compared to alternative payment methods? Here are four reasons why I think credit is given too much credit.
 
1. Shorter payment terms
Before the credit crunch, access to credit was easy with travel companies able to negotiate 60-day payment terms with suppliers. Those days are unequivocally over. Payment terms are much shorter, and even though the global economy is recovering, news of emerging markets not living up to expectations will continue to make access to credit difficult. All this means that credit is becoming less beneficial and attainable for travel companies.
 
2. It increases the cost of payment
Paying on credit also involves fees and interest increasing the cost of payment for travel companies. This is especially costly for international payments, where travel companies can end up on the wrong side of currency fluctuations. Having to set-up banking arrangements in foreign jurisdictions can also be time, and money, consuming. One widely used option is to pass customer credit card details directly to the supplier, but this brings no tangible reward for the agency. 
 
3. Discounts for immediate payment
Added to this, the rise of the Low Cost Carrier model, coupled with more digitally savvy consumers using comparison sites, has led travel suppliers to focus on optimising inventory. One prevalent tactic is to offer big discounts on fares and rates that are settled at the point of booking. 
 
Taking advantage of these discounts requires immediate payment methods. Using traditional cards is an option, but sharing card details increases fraud risks, and multiple transactions on a company card can cause problems with reconciliation. Using customers’ cards to pay makes travel companies responsible for any fraud or misuse of the customer’s card details by the supplier. 
 
4. More rewarding alternatives 
Today, there are innovative solutions which seamlessly integrate with booking and accounts payable platforms, enabling payment from within the workflow and automating reconciliation. What’s more, there are options which return a rebate on transactions for money back on your payments. And in an industry where fraud is a top concern, what value would you put on having a lower risk payment method? 
 
It’s time to get real about credit, and do the calculations. Ask yourself “do the benefits of credit outweigh the efficiency, revenue and lower risk benefits of alternative payment methods?”
 

 

Anthony Hynes
Managing Director & CEO

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