It’s tough out there for everyone – travel suppliers, retailers and, of course, consumers.
Meanwhile, the banks continue to hit the headlines with the worst results in modern times. The problem for those who rely on banks for support is that while in the past they might have been helpful in tough times, now banks only want to deal with ‘safe’ customers.
Of course, many of those banks own merchant acquirers, who are the people who manage the world’s credit cards – and at a time when consumer debt is breaking all records, these cards are vital to keep our economy going. But the painful truth is that those merchant acquirers are not happy with the travel industry at the moment.
The collapse of Freedom Direct has resulted in ABTA passing many charges back to the merchant acquirers if the customer paid with a credit card. The customer protection required by law through the Consumer Credit Act means that card companies can’t escape – and this is adding salt to an already painful wound. What can they do?
The answer is simple. Credit card companies are looking to reduce their risk to an absolute minimum. They are looking at the companies they work with, and those with weak balance sheets are going to find that their flexible friend may suddenly have become rigid.
As demand for holidays drop, and clients look for cheaper deals than in 2008, the banks are now looking closely at their customers’ finances and are withdrawing facilities – and that means that some travel companies will be unable to accept credit card bookings.
In a world where the vast majority of customers pay using plastic, every retailer needs to be able to accept credit card bookings – but now a number of companies are facing financial collapse if they can’t reassure the banks.
For those in this dilemma, the only simple solution is to move to a system where the banks are given comfort against all claims when a failure takes place.
Trust accounts may be unfamiliar territory to many in the travel industry, but the banks are very happy to be working with them.
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