Protected Trust Services managing director Daniel Landen makes case for model but says companies should have choice

Trust accounts have long been a financial protection solution for travel businesses in the UK. Many travel businesses that have embraced well-managed trust accounts pre-Covid-19 are now reaping the rewards.

Sadly, misconceptions and misrepresentations of trust accounts have led to many UK travel businesses not even considering the trust model – yet, many travel businesses could hugely benefit from embracing an independent trust.

To imply that travel businesses are now being “shoe-horned” and forced to use trust accounts is a further misrepresentation.

Are card acquirers asking travel companies to adopt the trust model? Yes.

But, the true question should be, ‘Why are card acquirers asking travel companies to join independent trust providers?’

Card acquirers are undoubtedly the first port of call for many consumers seeking refunds and acquirers are undoubtedly filling the financial gaps in the Air Travel Trust Fund that backs Atol.

Under the Package Travel Regulations (2018) travel businesses are given a choice of three forms of protection: bonding, financial failure insurance (FFI) or independent trust accounts.

All travel companies should follow the highest professional standards, and a code of conduct, and manage their clients’ monies for their intended purpose – to book the holiday. Consumer monies should not be used as working capital. This is not to imply that all travel companies who utilise bond and FFI as protection do this, but it is a prolific problem. And, in truth, a prolific problem that many industry leaders have long been aware of. Covid-19 has simply shone a floodlight on to the sheer enormity of the problem.

Using consumer monies as working capital is not only a misrepresentation to the consumer but it places any travel business in an incredibly weak position when ‘the music stops’. Currently, we are going through Covid-19, the biggest crisis we have ever known, but there have always been global crises and there will continue to be global crises that will impact the travel industry.

Adopting an independent trust solution as protection does not only mitigate the risk to the card acquirer, Atol and the consumer though. Most importantly, the travel business will mitigate its own risk.

The control that a trust account supported by technology that reconciles daily, and allows a travel business to trace their monies at any given time gives, gives a travel business strength and allows any travel business to trade at their optimal level.

Choice is key in business. I don’t believe trust accounts should be the only solution. Bonding and insurance most definitely have their place, and are more suitable for some firms.

However, bonding providers and insurers should ensure that, alongside each bond or insurance policy, the travel business is not using consumer monies as working capital. This stance will substantially strengthen the UK travel industry.

Until the bonding and insurance companies ensure this, trust accounts will inevitably be the preferred solution for many third parties and partners that a travel business requires to trade.