This article was originally published on the Finextra Blog here, written by Anant Patel – Vice President of EMEA and APAC @ WEX.
No one has been spared the impact of the COVID-19 pandemic, which has disrupted the jobs of millions of people across the world, prompting all businesses to rethink and adapt its strategy, ways of working and business models to a “new normal.”
Travel is one example of a sector feeling the effects of the pandemic. However, now in July, as we begin to see some conditions improve, travel companies are on the rebound, and should be firmly in the middle of phase two – recovery.
With recovery in mind, we still can’t avoid the fact that we are heading into another global recession. While the Coronavirus Job Retention Scheme (Furlough) in the U.K. has helped protect more than 9.3 million jobs to date, with the scheme set to end in October, wide-scale job losses may kick in. In fact, ManpowerGroup’s latest employment outlook survey found that companies report the lowest hiring intentions in over 20 years, and many don’t anticipate pre-COVID hiring to return to what is was until 2021.
With reductions in staffing across the sector (and the potential for this to rise further) and the increasing pressure on cash-flow and finances, it’s clear that employers will be looking to technology to automate their back-end processes to help them return to ordinary business volumes and set them on the road for recovery and path to success.
COVID-19 opens the door for automated processing
Automation and the uptake of digitised processes by travel companies is set to be accelerated due to COVID-19. There is now an urgent need for companies to streamline efficiencies so they can focus on their primary business: Getting customers on their next trip. They’ll be relying more on automation as a means to divert resources to key areas.
Cutting costs, driving out inefficiencies and automating once manual systems will therefore play a crucial role in the strategies of travel companies to navigate the financial fallouts of this pandemic and return to a stronger, stable position.
How can virtual cards shake up the travel market post COVID-19?
One area where there is significant opportunity to leave behind outdated, inefficient and manual methods is a digitised payments process – and a technology solution gaining prominence since the start of COVID-19 is Virtual Card Numbers (VCNs).
While VCNs are not a new concept, their uptake is set to continue to accelerate past the pandemic. Recent research by Juniper Research, found that the annual value of VCNs used by businesses will grow 90 percent over the next four years; exceeding $1 trillion by 2022. This is up from an estimated $568 million in 2019.
Deploying technology that can manage supplier payments for travel companies at scale, efficiently and effectively, will therefore be crucial in helping the industry get back on its feet.
Not only do existing cash-based methods slow businesses down and add costs, they also can leave huge scope for error and risks, as highlighted by the pandemic. Where firms had been relying on outdated payment methods such as cash, they were subsequently in a weak position to dispute transactions with the many suppliers involved upon the mass cancellations caused by COVID-19, leading to both financial and reputational damage.
However, when travel companies use a VCN, they benefit from chargeback rights set by the card networks, including Visa and Mastercard. This provides strong assurance that the travel company can get its money back in the rare case that things have gone wrong. Not only this, but VCNs also protect travel companies from their customers private information being shared to third parties and helps prevent damaging data breaches.
VCNs also help firms mitigate against risk of fraud – an increasingly pertinent issue amid COVID-19 where fraud has been on the rise. Single-use Virtual Card Numbers do not rely on a physical card that can get lost, stolen, or copied. They work within precise transaction controls, set by the travel manager, including specific amounts, timeframes and merchant or supplier or merchant categories, as well as being sent through the same trusted network as all major credit card transactions. Finally, as no banking information needs to be exchanged and/or maintained between the buyer and supplier, the risk of data compromise is significantly reduced.
Automation benefits go beyond supplier payments
Automation is not just about eliminating efficiencies during uncertain times, but also offering customers extra value, which is imperative for a business to rebound right now. VCNs help enhance customer choice, allowing those who use them to do its business greater ease. For example, many card providers can offer multiple card schemes, payment types, currencies, issuing and settlement locations – giving companies optimal choice and flexibility to support them as they look to stabilise business volumes.
As the need to reduce back office labor will continue to persist, we may see technology providers in the travel space move into new verticals – offering customers a holistic payments solution across all areas of business, such as accounts payable, marketing, rent, and many more. The benefit of VCNs in this space is that they can issue non-card as well, and across multiple payment types. A 2019 survey by Strategic Treasurer and Bottomline found that 54 percent of large companies and 65 percent of smaller ones reported that “manual payment generation workflows [that] are error-prone and time consuming” represent a top B2B payment challenge for their treasury departments.
Intelligent technologies can unlock greater business value
As the road to recovery for many industries begins, payments technologies and automation now have a huge role to play. Technology providers in the payments space can help these businesses benefit from automation by both reducing manual workload and offering value beyond efficiencies. But it goes further than this – In addition to automation and eliminating inefficiencies, by embracing technology into the payments process, travel firms can optimise their offering greater choice of global payment capabilities. Ultimately, it is this that will support travel firms and customer confidence during the uphill journey to recovery.