Why travel agents (and airlines!) should jump aboard the VAN wagon

December 5, 2018

If you work in travel and tourism, you’ll no doubt have heard at least some discussion around the acceptance of payments between airlines and travel agents, linked to IATA’s recent Transparency in Payments (TIP) initiative. TIP aims to address the changing face of payments – most notably by encouraging airlines and agents to agree payment methods. Importantly, no form of payment is prohibited.

This initiative has been further propelled into the spotlight by the World Travel Agents Associations Alliance (WTAAA). It’s calling for a more holistic view of payment options across the travel industry. It’s great to see a global industry body such as WTAAA advocating the value that cards bring to the travel value chain. Especially, since every form of payment has its own cost, benefit, and risk profile for every part in the value chain.

Indeed, I want to wade into this discussion to highlight that there are many virtues of using eNett Virtual Account Numbers (VANs) for all types of travel organisations. Here are just a few that airlines and other stakeholders in the value chain may not be aware of:

Get paid faster

Every company aspires for a shorter settlement cycle. It means faster and smoother cash flow, as well as less risk from funds being trapped or unavailable. Currently the typical settlement time from ticket issue to settlement via BSP Cash is around 17 days*. eNett VANs offer shorter settlement time for airlines of between two to four days. For an airline with 8% Weighted Average Cost of Capital (WACC), this is a saving of around 30bps in hidden payment costs.

Reduce chargebacks, fraud, and ADMs

eNett VANs achieve near-zero** chargebacks toward airlines, leading to significant reductions in costs and effort associated with ADMs. Fraud rates from direct sales by airlines have been reported at 1.2%, with very high indirect costs. However, the fraud rate for eNett VANs payments to airlines is virtually zero*. Further, the impact of credit card data breaches at airlines is minimised if payments are being made with eNett VANs, because end customer data from travel agencies isn’t exposed (since it isn’t passed through) and every eNett VAN uses a unique card number. eNett VANs can also be locked down via up to 10 parameters to drive down fraud risk.

Reach more customers

Although travel agencies focused on specific geographic markets are usually well placed to accept preferred customer payment methods, these methods may not be readily accepted by airlines or could be costly to integrate. In these cases, travel agencies can use a ‘merchant model’ and accept payment from customers, before making a separate payment to airlines. Customer and market factors mean travel agencies outside of the USA typically prefer a merchant model, where they are still agents of the airline, but become merchants of record for the payment from the end customer. Travel agencies typically prefer to pay suppliers with eNett VANs and therefore may be more willing to list airlines that accept them.

Enjoy stronger partnerships with travel agencies

eNett VANs protect all parties against adverse events and offer operating efficiencies. For example, airlines are effectively creditors to travel agencies and can incur losses if agencies default. This happens despite efforts from IATA and airlines to establish, monitor, and enforce credit limits on travel agencies. Credit management takes time, effort, and investment, and may also limit sales in peak periods and for high growth travel agencies. There is no need for credit management when travel agencies pay airlines with eNett VANs, because payments with VANs are guaranteed. Additionally, eNett VANs can help strengthen agents’ banking and shareholder relationships by eliminating their concerns about travel industry default risk.

Simplify payments processes and reduce costs

Accepting eNett VANs as a form of payment can lower airlines’ payment processing costs, because accepting this form of payment is just like accepting any other Mastercard. In fact, airlines have been paid with eNett VANs since 2011. Leveraging existing processes used for Mastercard acceptance can lead to less reconciliation effort and less general payment handling costs after acceptance, which can occur with other forms of payment.

In a time where the payments landscape is constantly changing, all stakeholders need to be open minded about the benefits that various payment solutions can bring. At eNett, we are committed to working with our travel agency customers, airlines, and other stakeholders, to provide payment solutions that benefit all participants in the travel value chain.

We welcome the opportunity to add value to discussions with major airlines and travel agencies.


* eNett analysis, based on typical settlement cycle times.
**Rate of fraud related chargebacks by number of transactions with eNett VANs Q1 2017-Q2 2018 when paying airlines. Exact rate in that time was 0.000003% or 1 per 30M transactions. The number of eNett VANs payments to airlines during the specified time period was not 30M. Total non-supplier default related chargebacks in the same period was 0.0013% or 1 in 80K transactions - most due to duplicate processing.

.

More Blog Posts

14 November 2018

HOW ASIA IS CREATING A BOOMING TRAVEL INDUSTRY

According to the World Travel and Tourism Council, five of the world’s ten fastest growing tourism cities are in Asia, putting the region at the forefront of tourism in the foreseeable future. Compared to major western economies, such as the U.S., U.K. and Germany, where GDP grew at less than 2.5% year-on-year in 2017, the APAC market grew at a much faster pace. China’s GDP, the second largest worldwide, increased by 6.9% in 2017, whilst India, rose by 6.6% during the same period.

Read more

26 September 2018

Technology and travel – the past, present and future.

Over the past 20 years, technology has played a role in the growth of the tourism and travel industry. This blog explores recent technological advances and how technologies like big data, artificial intelligence and digital platforms can be harnessed to boost growth and improve the customer experience.

Read more

03 September 2018

Why the travel industry should take a leaf out of Amazon’s book

It’s predicted that Amazon, the $900+ billion tech giant that is revolutionising customer experience , may disrupt the online travel industry next. So what can online travel agents (OTAs) learn from the retail giant to ensure they too do not get left behind?

Read more

31 July 2018

European summer 2018: experience trends are changing travel industry traditions

European summertime is a notoriously busy period for the travel industry, as travellers all over the continent jump at the chance to book flights to seek out sunnier destinations. In the UK, some airports have claimed that 2018 will be the “busiest summer ever”, expecting millions to pass through their doors between July and September.

Read more

25 June 2018

Nine milestones since 2009

Yesterday marked nine years since we started the eNett journey back in 2009. From day one, our aim has always been to shake up the industry by helping travel companies take the cost and complexity out of payments. And the proof is in the pudding, as the uptake for Virtual Account Number (VAN) technology has taken eNett from strength to strength.

Read more

29 May 2018

Our Vision for GDPR

The European Union General Data Protection Regulation is coming into effect on 25 May 2018. eNett believes personal data, privacy and security are of the utmost importance for all. In line with this, we are in the process of making changes globally.

Read more

17 May 2018

How OTAs are navigating the changing landscape of the travel industry

Nowadays, travellers have many options available to them to help choose destinations, compare prices and make reservations independently and easily. Competition in the travel industry is high, and margins are low. It’s clear that online travel agencies (OTAs) can’t do business in the way they used to.

Read more

11 April 2018

How fraudsters are targeting OTAs

Fake hotels are fast becoming a massive issue for OTAs, leaving them out of pocket. And they’re becoming ever more sophisticated and believable too. What can OTAs do to protect themselves from this growing threat?

Read more

22 February 2018

Costing US$21B a year - it pays to know about fraud in travel payments

In 2017 the impact of fraud is estimated to have cost travel intermediaries US$21B. By 2020 the impact of fraud is expected to cost US$25B, driven by both a migration from offline to online, and an expected uptick in the rate of fraud. Understanding fraud and its true impact and cost to travel businesses is the first step to combating it.

Read more

07 February 2018

Future-proofing your business for 2018

Anthony Hynes gives his top four considerations travel companies should be thinking about to get ahead in 2018.

Read more

12 December 2017

A Year in Review for Travel

2017 is shaping up to be a record-breaking year for the travel industry. eNett MD and CEO, Anthony Hynes, recaps of some of the highs and lows over the past year, and ways travel companies can continue the growth trajectory in 2018

Read more

16 November 2017

Tackling Fraud in the Travel Industry

As part of International Fraud Awareness Week, eNett MD and CEO, Anthony Hynes gives his view on how travel agencies can tackle increasing levels of fraud in the travel industry.

Read more

30 October 2017

Key to tapping Asian travel market is payments

As part of International Fraud Awareness Week, eNett MD and CEO, Anthony Hynes gives his view on how travel agencies can tackle increasing levels of fraud in the travel industry.

Read more

27 September 2017

We’re backing World Tourism Day’s drive for sustainable tourism

Travel and tourism grow every year. Many underprivileged communities across the globe are being displaced - especially those in high-growth travel destinations. 'Repay the eNett Way' is our hands-on approach to make a difference in these communities.

Read more

29 August 2017

Great employee experience = great customer experience

A unique value proposition is one thing, the second step you take when launching a business is just as important.

Read more

01 August 2017

How Virtual Account Numbers Simplify B2B Travel Payments

Travel agencies are wasting time and money - it doesn't need to be this way. There is a solution today, it's faster, easier and safer than many other traditional methods too!

Read more

22 June 2017

Eight Entrepreneurial Essentials

From a tiny no-frills office near Heathrow airport, to offices in Asia, Australia, Europe and America just eight years later - what a journey!

Read more