Virtual credit cards: when payments are about more than just money

Posted 13/01/2022 by Matthew Chapman

No doubt you’ve heard much about virtual credit cards, or VCCs as many call them. Perhaps your online travel agency or TMC is using them already to significantly cut payment transactions costs.


Cost savings are reason enough for many to embrace VCCs, you can imagine your CFO’s reaction. But there are also some additional and very important benefits on the operations side too.


For example, did the wave of cancellations caused by Omicron cause your business yet another cancellations, refunds and rebooking headache?


Well you might not have thought about it, but VCCs are highly effective and efficient at resolving this problem. In these uncertain COVID times this payment method has taken on a new life, allowing agents to claim refunds via the card dispute process when merchants didn’t provide the service.


Without cards in play agents – online and offline – are dependent on the policies of the travel provider for refunds. Alternatively, they can call on protection provided by government schemes, but these are primarily focused on consumers (think of ABTA/ATOL in the UK). Meanwhile the legal route is costly, could end in failure and, worst of all, very time consuming.


As the travel distribution chain can sometimes involve many parties, this means that even with the best will in the world payments can take weeks to be refunded as each penny passes via many banks.


The efficiency and reliability of VCCS also reduces acquirer risk by giving greater confidence to everyone in the distribution chain because the monies are less blended. This is key to understand, as the collapse of confidence by acquirers is what has led to many payments and refunds problems during the pandemic. 


There are also quite a few other reasons why your business might want to consider switching over to VCCs f it hasn’t already: transactions are speedier, the potential for capturing reliable data is huge (removing reconciliation problems), it’s easier to prevent and resolve fraud issues, and you can more easily control the spend limits of users.


Still not convinced? Hopefully Omicron will be the last wave and from there it’s plain sailing – allowing you to get back to doing what you do best: selling travel.  


You must consider though that the recovery is as likely to be difficult as the crash. Opening up the flow of credit, expanding working capital, and deciding which partners are still creditworthy and reliable, will be a huge drag just when you need to be…well focusing on selling travel.


As the saying goes, you can’t get the rainbow without the rain – and the storm of COVID cancellations is leading many to the pot of gold that VCCs undoubtedly are.

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