Alex Mifsud, CEO of Ixaris, suggests the OFT's proposed banning of debit card fees should prompt travel managers to look closer at the cards they use...
The call from the Office of Fair Trading (OFT) last week for travel companies to clarify surcharges and potentially scrap debit card charges certainly caused a storm in the travel industry. For consumers it’s of course a welcome development. As Cavendish Elithorn, senior director of the OFT's goods and consumer group, put it: "You can't buy online with cash and people are frustrated about being asked to pay for paying."
This issue doesn’t only affect consumers, though. Travel agents and those working for large businesses to book business travel are increasingly incurring these charges on a massive scale when they too book cheap flights. What is more, as most business travel is booked using a credit rather than a debit card, this development is unlikely to be of much benefit.
There is a solution to all this, however, and it makes use of a specific type of payment card. In order for them to advertise the cheap price, companies such as Easyjet and thetrainline.com have to offer one form of payment that does not incur all the charges. For Easyjet, for example, charges are avoided when paying by Visa Electron.
What hasn’t yet been picked up about the surcharge issue, however, is that it is just one of many payment challenges faced by travel bookers and travel agents. As travel arrangements become increasingly bespoke and staff continue to only use traditional payment cards, not only is it difficult to reconcile multiple transactions with actual orders, cards often get blocked as they trigger anti-fraud mechanisms when they are used repeatedly. There is also the issue of weak controls, of course, and the relative ease with which an unauthorised transaction could be made by inside staff and go unnoticed.
By using a ‘virtual’ card, businesses can get around these challenges and reap further benefits. A virtual card works just like a traditional card but is delivered on screen, electronically, instead of via a plastic card. It still has its own 16-digit card number, expiry date and three-digit security number, but because it’s delivered electronically, it happens in real time. With this system, a new card is created for each transaction and holds the correct value for each purchase. Because each transaction is a separate card, each has its own unique reference, the card number, which makes reconciliation far easier.
As all the types of cards that avoid charges – Visa electron and prepaid MasterCard – can be created in virtual form, travel businesses have a real cost-saving solution.
So while it’ll be interesting to see whether companies such as Easyjet do react to the calls of the OFT, those in business travel should take this opportunity to review payment processes on a wider scale.