There is a remedy: Ensure that you implement a B2B payments strategy as part of your NDC implementation. Here’s how.

B2B payments are missing from New Distribution Capability (NDC) discussions

To their credit, IATA has always recommended that NDC be implemented along with a solid payments strategy. Insofar as the standard brings the “direct to consumer” low-cost carrier retail model into the travel intermediary space, the NDC launch has been successful in getting airlines to think about payments.

However, the NDC-driven conversation has focused on B2C payments, even though NDC is designed for indirect distribution via online travel agencies (OTAs), traditional travel agencies, and other travel intermediaries, which are B2B payments and not direct distribution to consumers. So when airlines are thinking about payments in NDC, they need to be thinking about their B2B payment strategy with travel intermediaries, which will help drive their indirect distribution strategy.

Travel suppliers must implement a B2B payments strategy in support of OTAs

Flexible and secure payment options for paying suppliers are a necessary component for any OTA or other travel intermediary that wants to provide a great traveler experience. Similarly, any airline looking to expand its indirect distribution methods by working with travel intermediaries also needs a robust B2B payments strategy that offers B2B payment choice.

While the NDC standard doesn’t need to change, carriers that wish to use NDC to evolve their indirect distribution must make sure they have a B2B payment strategy that will meet the mutual needs of their OTA and travel intermediary partners.

The growing importance of retailing and indirect distribution

The voluntary NDC standard was launched a decade ago to help airlines retail to OTAs and other travel intermediaries which in turn allow those intermediaries to provide better travel retail services to end travelers.

IATA describes NDC as “a data exchange format based on offer and order management processes for airlines to create and distribute relevant offers to the customer regardless of the distribution channel.” Essentially it addresses what was then the industry’s current distribution limitations: product differentiation and time-to-market, access to full and rich air content, and a transparent shopping experience, according to IATA.

Adapting the airline industry to a retail model has been a huge transformational project of the past decade. Modernization efforts vary across carriers, but the impact of COVID-19 has accelerated airlines’ focus on the personalized experiences for end-travelers like tailored fares, products, and payments (on the ground and inflight) that have become expected by travelers.

OTAs and other travel intermediaries already moved to a retailing model many years ago as travelers expected the same kind of quick, simple, and easy online retail experience from travel as they do from buying on Amazon.

NDC enhances the ability of a travel intermediary to sell on behalf of an airline as it nurtures those kinds of seamless, enjoyable customer experiences. This can only benefit all in the travel value chain from the traveler to the travel intermediary to the travel supplier.

Many airlines and hotels are now fueling growth through indirect distribution by selling through OTAs and other travel intermediaries. In fact, the largest travel intermediaries have become so important in the travel distribution ecosystem that, pre-COVID, our review of company performance reports shows the top players were each processing in the order of $100B in total travel volume annually.

In a recent research report, Travel Retailing: The Shift to the Merchant Model that is Redefining B2B payments and Distribution Strategies, we show that the benefits of indirect distribution have existed for a long time, but recent world events, evolution in customer expectations from e-commerce, and the pressure on the travel industry from the global pandemic have accelerated the trend for travel agencies to adapt to changing customer preferences.

Our report found:

• Adoption of the merchant model is increasing around the globe, including in the USA.
• In the merchant model, the travel agent takes the booking and also processes the end traveler’s payment, becoming merchant of record on the inbound consumer payment and therefore needing to make separate outbound payments to each supplier in the booking.
• Travel agencies can choose to accept any locally used form of payment in any currency from the traveler, thus avoiding their reliance on usually limited forms of payment accepted by the supplier.
• The merchant model is a better way to manage payments and enable the high-touch experience sought by end travelers. As a result, many of the world’s largest travel agencies are using it. In some cases, suppliers and agencies work together to incentivize traveler choice and agency payment. OTAs that work with ����Vlogvirtual cards for B2B payments under the merchant model can return these benefits back to suppliers.

Now it’s time to take the last step and include methods for how OTAs pay travel suppliers that support their ability to meet traveler needs throughout a dynamic and always changing travel offering.

Benefits for travel suppliers from indirect distribution

While selling direct is still very important for most suppliers, indirect distribution – essentially selling through OTAs and other intermediaries – can deliver a wide range of benefits to hotel operators, airlines, car rental companies, and other travel suppliers such as increased demand, improved efficiencies, and reduced risks. According to a McKinsey report, the airline industry can capture $40B in additional value, with a potential of up to $7 per passenger or the equivalent of approximately 4% of revenue.

Many of these benefits are only available or optimized when travel intermediaries adopt the merchant model. The key benefits of indirect distribution to the supplier are:

• Expand geographic reach into new markets, and benefit from the travel agency’s local brand awareness and regulatory expertise
• Fill capacity through additional demand generated via travel agencies
• Advanced fraud management capabilities as airlines will no longer be able to issue agency debit memos (ADMs) to recover costs of fraud if agents redirect consumers directly to the airline’s payment portal in NDC. This is significant, as IATA research found in 2018 that the airline industry suffers a 1.2% loss of revenue annually to fraud.
• Better traveler experience and loyalty via trip packages, multiple trip components, cross-selling, and up-selling
• Change management and efficient after-sale servicing of customers

Adoption of indirect distribution is generating returns. For example, one international airline executive is quoted in our Travel Retailing report, “We see strong use cases for direct model and for the indirect model. In addition to reaching away markets, we definitely see value in the reach and the servicing piece as well. Agents play an important role in terms of not only promoting our brand but also the availability of services they can book with [us].”

Airlines that connect their indirect distribution and payments strategies will be better positioned for growth

Linking distribution and payments, to give travelers a better payment experience, has long been a priority for airlines’ direct distribution. Many airlines have invested in payment choice, as well as payment security like 3DS and SCA.

That same connection needs to be made between indirect distribution and payments, as it becomes even more important when travel agents are added into the mix. Especially since we have seen OTAs demonstrate an ability to adapt to change and react to consumer demands in the post COVID world, making the customer experience even more seamless. As with direct distribution, payment needs to be treated as the last step to enabling distribution.

IATA has the industry talking about payments, and with NDC this needs to be about B2B payments. It’s important for airlines to work with agents and intermediaries to create a B2B travel payments strategy that complements their B2C one. ����Vlogis seeing more innovation in B2B travel payments between our OTA customers and travel supplier partners. This makes B2B payment choice a critical element to a successful B2B payments strategy.

Travel supplier distribution and payments must be aligned, symbiotic, and connected

Choices made by key players in the value chain affect the entire value chain.

The choice between agency model and merchant model delivers different options and outcomes for the whole travel value chain, from end travelers through to travel suppliers.
B2B payment choice must be a critical part of any airline’s B2B payment strategy to truly deliver the benefits of travel retailing via their travel intermediary partners

Airlines and agencies must work closely together to continue to find solutions that work for both their businesses as well as the traveler. ����Vlogfacilitates the establishment of many mutually beneficial solutions with our OTA and intermediary clients and their suppliers to ensure a sustainable model that benefits all parties.

The industry is ready. In fact, payments was named as a high-priority topic for 2022 in last year’s IATA DDRS conference. Let’s be sure that we work together to consider all payments related to distribution, including both B2C and B2B.

Learn more about how ����VlogTravel enables travel agencies and intermediaries to effectively and securely pay suppliers all over the world to ensure a modern and seamless experience for end travelers, and business growth for themselves.

Sources:
(IATA)
McKinsey
The Center for Hospitality Research (Cornell)
IATA ​​on fraud management

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This has put banks, fintechs and any companies that process transactions at heightened risk. Already soaring prior to the coronavirus outbreak, card fraud in particular is forcing issuers and merchants to rethink their protective measures as the pandemic deepens.

One survey that 37 percent of U.K. finance professionals agreed that their existing finance and procurement processes put them at risk of fraud—and this was a belief they held prior to the pandemic. It’s safe to say their fears were founded, as in a single week during the pandemic (April 13-19), hackers attacked businesses more than 22 million times globally. All told, of all transactions during the COVID-19 crisis have been fraud and abuse attempts—representing a 20 percent increase over the previous quarter.

With fraud growing in incidence and complexity, businesses issuing or processing payments must be equipped with the tools to win the fight against it. A single tool is not enough; to stay a few steps ahead of fraudsters, businesses need a multilevel solution that includes both AI/machine learning and virtual cards.

AI and machine learning spot suspicious patterns

AI has ensured that companies are well-equipped to take on the kind of nuanced, highly sophisticated fraud now being carried out around the world. It quickly alerts analysts to anomalies, develops trend-based insights and discerns if a given transaction or series of financial activities are unusual or fraudulent. By applying machine learning, companies can mine historical and live data to locate patterns within customers’ behavior and can then evaluate every transaction to make accurate fraud predictions. The more data that’s collected across historical transactions, the better the precision in fraud detection.

Further, when a breach or fraud is detected, AI allows businesses to move quickly to address challenges and swiftly problem-solve. Let’s say that fraudsters get creative and tailor their attacks to news events—for instance, what we’ve been seeing in the news recently with PPE (personal protective equipment)-selling scams. As these new types of fraudulent transactions are identified, the AI model will automatically adapt based on the pattern of these transactions. This is a contrast to the legacy way of managing fraud, which was reliant upon a person to trial and error new business rules to detect fraudulent transactions.

Virtual cards offer a simple solution to fraud

Uniquely valuable in B2B contexts, virtual cards have the ability to significantly reduce the risk of fraud in several ways during this time. First, they can be set up to be used only once, so even if the data is subject to a breach, the card cannot be used if the payment has been processed.

Additionally, single-use virtual cards typically have tight controls associated with them, such as the amount (which can be a range of amounts or one specific amount), expiration date, merchant, and even Merchant Category Codes, among other parameters. With regard to amounts, single-use virtual cards can be authorized to use with one exact amount only (such as $100), or they can be authorized for multiple transactions that ultimately result in that one exact amount (such as five $20 transactions).

Overall, virtual cards decrease the likelihood of fraud because the virtual card information isn’t as useful to a fraudster if stolen.

Diversify your fraud protection for best results

To fight fraudsters while maintaining a positive customer experience in our current climate, companies need to take nothing less than a comprehensive approach. That must include AI-based solutions and the implementation of fraud prevention tools such as virtual cards. Together, these tools will make it much easier to spot fraud attempts accurately without interrupting sales or declining genuine transactions.

Find out more about WEX’s solutions

Contact us to learn more.

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Some of the latest attacks have staggering numbers, affecting hundreds of millions of customers, and include particularly sensitive data, such as payment details and passport numbers. This is data that can be used beyond single fraud attempts for longer term, more complex, and more damaging crimes, such as identity theft.

Assessing The Impact Of Fraud In The Travel Industry

How bad is it? Here are some numbers that should put fear in the hearts of travel companies:

• The cost of each year is $858 million according to IATA.
• reports that there was a 19% increase in fraud on land travel services last year.
• There were $5.2 billion spent in in 2017 according to a survey commissioned by the American Hotel & Lodging Association (AHLA).

For more see: Data Breaches Continue To Plague The Travel Industry

These numbers show that fraud is hitting all areas of the travel industry, and in many different forms. The high volume of transactions, large value transactions, rapid pace of transactions, large number of suppliers, and the global nature of travel purchasing all lead to the prevalence of fraud in the industry. The sensitive nature of data can also attract fraudsters, who can use that data for malevolent purposes.

What Can Travel Companies Do To Prevent Fraud?

1. Stay current on the types of attacks happening in the industry, down to a product level.

The hotel industry may see different types of fraud than the cruise or airline industry. Even within categories, there are differences. For example, major airlines are targeted 37% more often than low-cost carriers, according to a fraud report from Companies expanding into new markets or introducing new products or services should fully understand the risks and threats of the new spaces they’re entering into.

2. Find the right balance of enhancing your customers’ online experience and protecting their data.

In the battle for online customers, the customer experience has been emphasized, resulting in the frictionless online transactions that customers love. In some cases, this can come at the expense of implementing identity verification measures, which can be seen to potentially contribute to abandoned purchases.

Successful companies will need to find the right mix of intelligent fraud detection in order to prevent fraud while giving customers a seamless experience. This is even more critical in markets where regulation calls for stronger customer authentication measures (for example, in the EU two-factor authentication will need to be in place for online purchases by September 2019).

3. Know your suppliers and your customers.

Knowing your suppliers and forming solid relationships with them can help your company better prevent and detect fraud. Knowing your customers is also critical. If your company does business in different regions, be sure you understand the differences in how customers behave in those regions. This knowledge can help inform your fraud strategy.

4. Protect your customers’ data at all costs.

Instead of passing customer payment information along to suppliers, use the merchant model with a separate payment method instead. Collect payment using your secure systems, and then pay suppliers using a separate secure method such as virtual card numbers (VCNs).

VCNs are used for one transaction only and controls can be set to limit how the number is used. When you protect your customers’ data, you protect your own reputation.

Fraud is not going away, and fraudsters will continue to change their tactics and get more sophisticated with each passing year. In the fight against fraud, knowledge is power. Companies that know their industry, their suppliers and their customers well will be better positioned to detect and prevent fraud. The bottom line is that companies must find a way to protect their most important asset – their reputation.

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This shift no doubt directly correlates to the dramatic rise of out-of-pocket healthcare costs, as evidenced by growing deductibles and how much employees are now being asked to pay toward their health coverage. In just the past two years the number of employees at companies with more than 200 employees and a deductible over $1,000 went up 40 percent—a figure expected to continue its upward trajectory. The among covered workers with individual plans is now $1,573.

Skyrocketing health expenses building and evolving the CDHP market

Today’s employee-benefits leaders are actively looking for ways to reduce cost, simplify and facilitate stronger employee engagement. Consumer-directed healthcare plans (CDHPs) support all of these goals and will continue to thrive in this space as long as they remain priorities.

Already, CDHPs have grown by double digits—and are projected to increase in number from 62.6 million in 2017 to 96 million in 2021. As of 2018, 37 percent of covered employees were enrolled in a CDHP.

In particular, employers are becoming more comfortable incorporating health savings account (HSA) offerings into their benefits portfolio. According to Aite, the number of HSAs is projected to grow from 18.6 million in 2017 to 42.6 million in 2021, and HSA payments are expected to skyrocket to $66 million by 2021, from $29.8 million in 2017. The reason we are seeing such a high level of growth in HSA adoption is due to the significant tax benefits associated with these accounts, as well as an increase in understanding by consumers and employers on the long-term savings potential that HSAs present.

Employees want multiple insurance plan options

While deductibles continue to increase and a strong movement toward HSA plans builds across businesses of all sizes, one of the more notable shifts over the last 12-24 months relates to employers providing employees with a choice of insurance plans as opposed to going full replacement.

Source:

The yellow bar in the above chart represents companies with account-based plans as an option, and the purple indicates where it’s the only option, i.e. total replacement. Currently, 21 percent of employers offer CDHPs as their only plan. There was a time when a full replacement strategy was a strong trend among employers, and a direction we thought the market was moving in; you can see the growth from 2 percent in 2006 to 20 percent in 2015. What we are seeing now is that growth trend leveling off, as employers think more about providing options to their employees so employees can choose the plan that is right for them.

With multiple insurance plan options comes the need to support multiple accounts—flexible spending accounts (FSAs) and health reimbursement accounts (HRAs) along with HSAs. Over time, employees can be expected to, and do, move between these different accounts, as their healthcare needs and risk tolerances change and plan designs evolve.

As employers move toward offering employees choice, it’s important that they have solution providers who can support a multi-account solution. Employer turnover has been found to be 40 percent lower among ����VlogHealth Partners that offer multiple accounts. And more than 95 percent of our top-quartile growth Partners offer multiple accounts.

We’re proud that we’re able to offer our Partners the ����VlogHealth Cloud, the only platform built from the ground up to handle all benefit account types in a single platform, supporting more of each account type (HSA, FSA and HRA) than any other in the industry. We invest in the growth of our Partners by working strategically with them to capture new market opportunities and define growth strategies. You can count on us to keep the platform flexible to accommodate new growth as the health benefits landscape continues to evolve.

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Right now we’re in an era of innovation and experimentation with blockchain. Just as in the early days of the internet, there will be as many failures as successes, great ideas that turn out not to be feasible or commercially viable and huge innovations that nobody could have even imagined. The decentralized nature of blockchain makes the price of entry low and accessible to anyone, which means a huge opportunity for innovation from around the globe and across all industries. The unique advantages of the technology could change the face of our lives, from how we access healthcare, to how we verify our identity, pay for services, and, of course, how we travel.

So how could blockchain apply to the travel industry? Here are some possibilities:

1. Payments and smart contracts. Payments in the travel industry are notoriously complicated, due to the number of players and the use of multiple currencies. The transparency and immutable nature of Blockchain mean that there is an unchangeable record of each transaction, making auditing unnecessary.

In addition to storing data, blockchain can also incorporate logic in the form of “smart contracts.” These contracts could be set up and executed to automatically pay commissions, split payments between different vendors, or ensure negotiated rates and fares are adhered to.

2. Verifying and tracking data. The key benefit of blockchain is in tracking data in a permanent form. Since data can only be added to the blockchain, but never changed, and is permanently “chained” to the previous block of data, it’s nearly impossible to be hacked. And since that data is verified by multiple sources in a decentralized model, the data cannot be changed or altered by any single entity. This makes it an ideal technology for anything that requires verification. Some applications in travel could include:

• Tracking a passenger’s baggage. The chain would clearly show everywhere the bag has been and where it currently is.
• Verifying processes, such as maintenance logs for aircrafts. Every required aircraft check could be logged in the blockchain, could not be altered with, and would be available for anyone to view.
• Identity. Passport info, health records, security clearances, and payment information could all be stored in a blockchain, creating a virtual identity that could be used across vendors seamlessly.

3. Managing inventory. Blockchain could also be ideal for managing inventory, such as hotel rooms. The decentralized aspect of blockchain means it is plausible for a hotel to publish its inventory to a shared ledger and partners, such as OTAs, book from this ledger of rooms. And since the information is verified individually by each node, the data is accurate and up-to-date throughout the network.

These are just a few examples of blockchain’s potential in the travel industry, but the possibilities could also include anything from municipalities tracking Airbnb rentals in their city, to loyalty programs where points could be traded among people and between brands. There has also been a fair amount of speculation that blockchain will affect the “middlemen” in the travel industry, including OTAs and banks. The argument is that since it can be inherently trusted due to its transparency and immutability, trusted third parties will no longer be necessary. However, most experts agree, the value of these “middlemen” goes well beyond a simple view of trusted relationships and their value in the overall travel ecosystem will evolve as technology evolves.

Smart companies are investing resources into figuring out the best applications for the technology, while also understanding its limitations. Not every business use case makes sense to transition to blockchain, and the technology also has its current drawbacks, such as the speed of transactions.

From corporations investing millions of dollar into the technology, to individual coders around the world creating their own innovations, we’re in a period of exciting growth and experimentation. Only time will tell how blockchain will evolve, what applications will be imagined, and how it will impact the nature of the travel industry and beyond.

Read more: Preparing Your Business For Blockchain

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Pratt acknowledges there were some surprises. “The entities seen as most likely to innovate were payment processing companies, like WEX.” He adds that the criteria found to influence payment platform selection weren’t unexpected, but “user experience” coming in on top, at 70%, was.

The CFOs were also asked about disruptive technology. Some of the survey’s key findings were:

• 50% expect blockchain technology to change how their accounts payable operate
• 44% believe it will allow their business to scale more quickly and internationally
• 55% feel mobile capabilities to manage and approve payments are very important to their business over the next 2 years and the same percentage cite mobile payments as very important
• 40% see artificial intelligence (AI) as very important and 37% rank augmented reality/virtual reality (AR/VR) as very important

What do these technologies mean for the travel industry?

Blockchain

“Blockchain is potentially not just evolutionary,” said Pratt, “but a disruptive technology. Blockchain is an enabler in much the same way the Internet is an enabler. So, it’s the applications and functionality built on top of blockchain that will be the disruptors.”

In “Beyond the Buzz: The Potential of Blockchain Technology for Airlines” Accenture Consulting explains that the travel industry is well suited for this technology because “a web of complex and seemingly endless data reconciliation is happening behind the scenes of every touchpoint of every traveler’s trip.”

The is testing the technology’s ability to better manage hotel inventory by adding their “smart contracts” to a blockchain. As Patrick Whyte wrote this summer for , “TUI plans to put its full inventory onto the blockchain and then connect this up to the purchasing and property management systems.”

Mobile payments

The technology behind mobile payments is maturing. Security issues have been reduced, and it’s easier for businesses to implement, which is why consumers expect to be able to do it all–from browsing to buying—on their mobile devices. Estimates are that US mobile payments reached $27 billion last year, nearly triple the 2015 total.

Just like they do with other purchases, customers want a seamless mobile experience when making their travel plans. This benefits travel operators because research has shown that when it’s easy to make mobile payments purchase decisions are faster and upselling increases as does brand loyalty.

Artificial intelligence (AI)

AI is here in travel, and it needs considerable data for accurate predictions and recommendation. That’s one reason many companies begin with search and chat functions. Greg Oates notes in Skift’s “there’s still a long way to go before AI and human-machine interfaces truly transform travel research and the user experience across a broad spectrum of brands. ”

Hello Hipmunk, Hipmunk’s virtual travel assistant uses AI to answer travelers’ questions early in the planning process. “Rather than just providing flight and accommodation options when asked about specific dates and destinations,” said Adam Goldstein, CEO and co-founder, “we can give advice and recommendations and respond to questions like, ‘What’s the best time to go to Cancun from Chicago?’”

Augmented reality & virtual reality (AR & VR)

Giselle Abramovich recently reported on Adobe’s cmo.com that “ of 321 million social engagements by Adobe Digital Insights (ADI) has found at least eight of the largest hotels have tested some kind of VR experience during the past six months.” ADI also found a 13% year-over-year increase in social mentions for travel and AR/VR.

An at Gatwick Airport is a “first of it’s kind” AR application for airports. As International Airport Review explains, “passengers can be shown directions in the camera view of their mobile device, making it easier for them to find check in areas, departure gates, baggage belts etc.” The system opens up the possibility of other “real-time services” from airlines and airport retailers.

And traditional travel agents are quickly adopting these new technologies too.  This past spring, Bradley Gerrard wrote for , “the whole industry is embracing digital technology, making travel agents’ shops more interactive.” One example he cited are the Thomas Cook’s “Discovery” stores, which offer customers VR headsets so they can experience hotels and other aspects of their potential trip.

These disruptive technologies and their current applications are likely just the beginning. And they certainly present challenges for companies looking to determine how best to take advantage of the opportunities they present for their brand and their customers. Who knows where it will lead?

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