Comment: How to cut the costs of card acquirers

Travel merchants should take care selecting payment processors, says Richard Swales of Paysafe in the second of an occasional series on payments technology

Travel merchants have always had a complicated relationship with credit cards. Consumers rely on credit cards more than any other payment method when booking travel and this won’t be changing soon, with a recent report finding credit cards are still the most-used payment method for long-haul flights and holidays.

The challenge lies with the relationship between merchants and card acquirers – the financial institutions which process and settle card payments.

Acquirers must refund cardholders if a travel company goes bust before a travel service is delivered, and so they rightfully demand security. This means the travel sector finds large percentages of its cash reserves held by card acquirers for long periods of time.

But many acquirers now understand that locking away a travel company’s cash can be devastating financially and are taking steps to address this. So how can travel companies identify the right acquirer for them?

First, it’s important to note the developments empowering acquirers to be more progressive in their work with merchants – namely, the new payment technology solutions and financial structures enabling them to be more supportive without over-exposing themselves.

Payment solution providers can now offer advanced business intelligence tools which establish exactly when funds should be released back to a merchant, removing the need for acquirers to hold on to them longer than necessary.

There are providers like Paysafe with strong backgrounds in the travel industry – and this knowledge and expertise means they can read the risks more accurately, and as a result demand less security and release money faster.

In short, the right technology can mean smaller funds are demanded up front and can be released back to the merchant sooner. Money can be held with less stress on the merchant’s balance sheet and, in certain cases, collateral may not be required from the merchant at all.

These tools can significantly reduce an acquirer’s impact on travel merchant liquidity.

The challenge is identifying the acquirers willing to take the steps needed to have this positive impact.

Tools of the trade

So how can travel merchants assess whether an acquirer will make their lives easier? First, establish whether the acquirer offers the new technology tools and financial structures to improve your liquidity.

At a minimum, these should include:

  • Smart data tools – only acquirers with top-quality fulfilment-gap monitoring can reduce how much security they demand from merchants.
  • Safeguarding – a trust-based process for holding agency funds, with scheduled release back to the merchant, shortens the period when funds sit outside the merchant’s bank account.
  • A multiple acquirer strategy – this will establish whether the acquirer will work with other acquirers to reduce risk and improve terms for the merchant, which is essential to ensuring they get the best arrangement possible.

Looking further ahead, travel companies should ask acquirers about their innovation pipeline. For example, plans to introduce blockchain to track secondary exposure could be beneficial in the future if you are a travel agency.

Finally, travel merchants should ask acquirers how well they understand their business. While cutting-edge tools are a boon for merchants seeking a smoother arrangement with acquirers, old-fashioned relationship building remains crucial to ensuring a partnership thrives.

It’s important that any potential acquirer is committed to deep engagement and learning properly about your business, putting in the time to understand your plans and how successfully you are executing against them.

In doing so, a new acquirer will often become confident enough to offer better terms, whether that involves releasing security earlier or eventually removing the need for it entirely.

While credit cards have been both a blessing and a curse for travel merchants, there are tools and practices now available to develop better working relationships with acquirers.

With the right acquirer, a travel company’s liquidity can improve and the future look a lot brighter.

Richard Swales is chief risk and compliance officer at payments company Paysafe

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