Supplier payments have proved to be a complex, time-taking and costly process. However, now there is a breather in the form of virtual payments (VCNs). Nissrin Damdam, Business Development Manager at NEC Payments, throws some light on the same for TravTalk.
Managing supplier payments in the travel industry is a challenge that hogs time as well as resources and represents a significant underlying cost to doing business. The stringent requirements of the billing and settlement plan favoured by IATA can be restrictive and capital intensive, and settling multiple bookings within bulk settlement payments can lead to reconciliation issues. These potential problems are in addition to the fundamental shortcomings of bank transfers, which can be expensive, are slow, and can also face additional compliance-related delays.
Nissrin Damdam, Business Development Manager at NEC Payments, however, says that now there is a solution for it, which she shares with us, “These challenges can be overcome by using virtual cards (Virtual Card Numbers—VCNs) to make payments. VCNs are single-use and can be issued dynamically at the time of booking in order to simplify reconciliation and workflow by linking the payment directly to a single booking”. VCNs are accepted by the supplier in the same way as any other card payment: they receive authorisation immediately, and funds are settled in the same way, and at the same time, as any other card payment that they might accept from any other customer.
Nissrin further adds, “VCNs offer travel agents and travel management companies a fast, convenient and secure way of making supplier payments at a lower cost than cheque or bank transfer. In addition to maximizing profitability by reducing FX fees, resources used, bank costs and capital requirements, they can generate new revenues from incentive rebates”.
Overall, the numerous benefits of virtual payments for the travel industry can be summarised as below:
• They reduce the cost and time associated with making international bank transfer payments.
• They take control of FX and reduce exposure to FX rate movements.
• They reduce working capital requirements by lowering BSP volume and the requirement for BSP settlement guarantees.
• They generate a new revenue stream from the incentive rebates paid as a percentage of the total monthly value of VCN payments made.
• They help get access to enhanced data for management reporting, BI and analytics.