This whitepaper will help you if you are:
• Travel agents (including “bricks and mortar” agents, online travel agents, and travel management companies)
• Tour operators
• Coach and bus operators
• Cruise lines
This whitepaper explains:
The problem — Holdbacks and other collateral can severely impact travel companies’ liquidity
• Travel is an ultra-high-risk sector for card acquirers because most payments are for future delivery. If merchants fail to fulfill a service for which they have taken payment (often months in advance) customers can recover their money from the acquirer by initiating the chargeback.
• Acquirers traditionally demand substantial cash collateral (holdbacks) or other financial security from travel merchants to mitigate this risk.
• Holdbacks lock away substantial funds for travel companies and can therefore be highly damaging to liquidity.
• High-profile collapses and the COVID-19 crisis have driven acquirers to impose even harsher terms or quit the travel sector completely.
The Solution — Safeguarding allows liquidity to flow again
• A modern safeguarding arrangement between an acquirer and merchant (created via a trust mechanism) using sophisticated data analysis, is based much more precisely on what has actually been booked and paid, how far in advance of travel, etc.
• Better visibility means the acquirer can typically withhold fewer funds as security from the merchant, and release those funds back to the merchant faster.
• Unlike traditional holdback: – there is a clear schedule for releasing funds back to the merchant. – funds held in trust can be counted as restricted cash on the merchant’s balance sheet.