Guest Post: The role fintech can play in your post-COVID rebound

Nium’s Spencer Hanlon says firms convinced the chaos caused by COVID was a bit of bad luck are in for a punishing recovery

Spencer Hanlon, global head of travel payments and Head of Europe at Nium says firms convinced the chaos caused by COVID was a bit of bad luck are in for a punishing recovery 

Albert Einstein once said that the definition of insanity was doing the same thing again and again, but somehow expecting a different result.

With Omicron having been the umpteenth COVID variant to cause a wave of travel cancellations, why did it still lead to virtual insanity for travel related refunds, re-bookings and payment reconciliations?

As financial ecosystems go, B2B travel payments has arguably been one of the least innovative. This means that the gap between where it is and where it could be is immense.

Imagine the difference between a 1980s Nintendo and the current Switch model. Perhaps now you understand why we’re yet again facing a refunds mess?

In other words the current pressures of COVID – whether they be because of cancellations causing operational meltdown or just simply because of the huge loss in revenues – are not the cause of the problem, but simply the trigger for something much more endemic.

Step forward virtual credit cards: in these uncertain COVID times this B2B payment method has really come into its own, allowing agents to claim refunds via the card dispute process when merchants don’t provide the service.

By contrast, without cards in play, agents are dependent on the respective airline or hotel policies for refunds.

Alternatively, they can call on protection provided by government schemes, but these are primarily focused on consumers (think of Abta/ATOL in the UK). Meanwhile legal recourse is expensive, risky and, worst of all, very slow.

All of this in a travel distribution chain that can sometimes involve several parties, meaning that even with the best will in the world payments can take weeks to be refunded as each dollar passes through multiple bank accounts.

Virtual credit cards (or VCCs) aren’t some new-fangled invention that COVID drove into existence.

In fact they have been around for many years now, saving travel companies money and providing them with a winning combination of speed and data reliability (particularly for reconciliations).

Their efficiency and reliability also reduces acquirer risk by giving greater confidence to everyone in the distribution chain because the monies are less blended.

This is very important to understand, as the complete collapse of confidence by acquirers is what has led to many of the B2B payments and refund problems seen over the last two years.

VCCs are just once exciting part of the fintech revolution that has been changing the wider world, but that to a significant extent the world of travel has largely ignored.

How you perceive what fintech could do to help your business overcome the challenges of COVID depends on just what understand ‘fintech’ to mean.

To some it just means blockchain (and with that crypto), whilst others might think of consumer facing products like payment sharing app services.

But it can be so much more than that, encompassing not just B2B payments but also compliance, credit control, security or fraud prevention, and more.

Essentially it is about applying modern technology methods to the financial needs of the world: speeding up, simplifying, reducing costs, avoiding errors and generally enhancing processes that have not evolved in sometimes many decades or more years.

Many financial technology solutions that go beyond the back-office space exist too that can help your travel business recover more quickly from the ravages of COVID.

For example, offering people a subscription service could boost steady revenues or allowing them to pay in installments could increase the conversion rate – and there’s plenty of fintech providers for both those services you can outsource to.

There’s a lot that can be done for the in-destination experience too. Contactless payment methods, and even automated ones like you experience when exiting your Uber at the end of the ride, all prove popular with many guests.

Just think how much time gets taken up at hotels, not least reviewing the bill for the mini-bar or taking deposits at check-in.

In these COVID times that not only reduces contagion risk, it reduces staff costs and allows travel businesses to focus on doing what they do best: providing great experiences.

If you are still convinced that COVID cancellations are just a once-in-a-100-year bit of bad luck and your financial infrastructure is otherwise fit-for-purpose, consider this: the recovery is as likely to be as punishing as the collapse.

Opening up those credit taps, expanding your working capital, and establishing which previously reliable partners are still ‘good for the money’ will massively slow you down just when you need to be maintaining market share.

When the rapid recovery of your market leaves you with a financial headache then clearly something is very wrong.

If you find your business in that situation, might it be time to admit you’ve got a problem? Every cloud has a silver lining, let this wake-up call be yours.