Travel retailers warned over squeeze on credit card services

Travel retailers have been warned that they face increasing uncertainty as credit card firms tighten their demands for security for providing merchant services.


Chris Photi, a leading travel industry accountant and senior partner at Whitehart Associates, told a travel seminar at tax specialist Grant Thornton, this was “worrying him more than anything else”.


He said Royal Bank of Scotland’s sale last month of a controlling stake in Global Merchant Services, the parent of Streamline which is used by many travel firms, was potentially a cause for concern.


Photi said it was often preferable for travel firms to use the same bank as its merchant provider to provide reassurances about the cash position and viability of the business.


Merchant services have become increasingly difficult to find and costly for travel companies following the downturn and recent large failures.


At the beginning of this year, E-Clear, a firm that specialised in offering services to more risky companies, failed after it was embroiled in the collapse of Scottish operator Globespan.


Photi said he did not think merchant acquirers would have taken a big hit on two of the most recent large industry collapses; Turkish specialist Goldtrail and seat-only supplier Kiss Flights.


But he said the failure of Birmingham-based retailer Sun4u highlighted the risk merchant acquirers are taking on and how they will be reassessing their arrangements with travel firms.


Photi advised delegates to make sure they have adequate supplier failure insurance in place to satisfy merchant partners, although with insurance firms leaving this market this is also proving difficult to find.


He also said the lesson from the collapse of Goldtrail was that firms must scrutinise their agency agreements with suppliers to make sure they were correct.


He said Goldtrail, which was effectively operating as a seat-only supplier, had changed its terms with some large online players to sell to non-Atol agents on an Atol-to-Atol basis, which he said was illegal.


“If you are a large online retailer you should have in place your own standard agency agreements.


“The big boys do and if you have something like that if the invoicing if not quite correct a least you have a sound agency agreement.


“You, as managers of your businesses, should see your accounts department regularly. Ask for examples of sales documentation and make sure it says what you have contracted with that supplier.


“Dozens of companies thought they were buying from company as an agent and yet had Atol-to Atol invoices. Only two companies went back and said we will not buy from you unless you change that documentation.


“They are sitting in a very good place as far as their claims with the CAA are concerned at this time.”


 

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