The travel industry relies heavily on collecting consumer revenue through credit cards.
This has increased in popularity as high-profile travel business failures, including those of XL Leisure Group, Freedom Direct Holidays and Globespan, have highlighted the financial protection credit cards offer.
There are also provisions under the Card Scheme Rules that allow the consumers’ credit card companies to charge back against the travel agents’ card acquirer (such as Streamline for NatWest) for bookings paid for, but where the holiday hasn’t been taken, known as pipeline monies.
It is not well known that some card processing is now done by intermediaries such as E-Clear or First Data, who are not official card acquirers and are not tied under these same charge-back rules.
With increased financial risks for card acquirers, many intermediaries have reviewed their exposures and are looking to hold on to pipeline monies for as long as 60 days to offset the risk of charge backs that is greatest before the holiday has been taken.
Others are increasing the credit card charge levels or even seeking direct security from the travel business.
The best approach for firms is to reduce the perceived risk in their business by strengthening balance sheets and maintaining a positive relationship with their card acquirer.
Andrew Burnham, principal, MacIntyre Hudson LLP
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