May 26, 2024

Buyers told to prepare for surge in virtual card payments when new rules come into force this month

Corporate buyers and TMCs will see a surge in the use of virtual cards to pay for hotel accommodation after Strong Customer Authentication (SCA) is enforced on March 14, warns HotelHub.

The hotel technology specialist says the changes, which are part of the EU’s Payment Services Directive (PSD2), will also mean travel arrangers are likely to move away from using online booking tools for hotel transactions and instead contact their TMC to make the booking offline.

The new rules will change how credit and debit cardholders confirm their identity when making online purchases to help protect them from fraud.

When booking online, cardholders will need to undertake an extra step in the check-out process requiring them to verify their identity, typically via a one-time-password (OTP) delivered by SMS, phone or email.

This will cause problems for travel arrangers booking hotels via an online booking tool when using the credit or debit card that belongs to the traveller as the SMS code is delivered to the traveller’s phone.

“The B2C mechanics of SCA don’t work well in the business travel sector and card providers still need to find a workable solution. Hence, we believe the business travel industry will see a significant increase in the use of virtual cards particularly for hotel payments, to overcome the challenges bookers will face if they continue to use the traveller’s individual card,” explains Eric Meierhans, Chief Commercial Officer, HotelHub.

“Virtual cards are exempt from SCA because they are considered to be secure as the card is for a specific amount and one-time use. Currently this means that virtual cards are the most secure, reliable and practical way to handle payments for online bookings.

 “Those travel arrangers who need to continue using the traveller’s personal card to make a booking, will increasingly turn to their TMC to make the booking offline, as this will be deemed a MOTO transaction and won’t require SCA,” said Meierhans.

“SCA is definitely going to push more bookings offline and cause a reverse trend, because until now the corporate’s objective has usually been to drive OBT use for hotel bookings in order to keep transaction fees down.”

HotelHub believes SCA enforcement will accelerate the evolution of technology to handle hotel payments in the business travel environment, such as virtual card products for the individual traveller, not just the corporate organisation or TMC and greater use of mobile wallets such as Google or Apple pay for hotel payments.

“Ultimately, card issuers need to innovate and come up with payment technology and solutions that are relevant for the business travel environment and not simply try to impose B2C 3D secure workflows to the B2B space” said Meierhans.

“Looking further ahead to the medium and long term, we anticipate much more widespread use by business travellers of the mobile wallet on their smartphone to pay for hotel accommodation, as this avoids debit or credit card use entirely because the payment is a bank funds transfer.”

He said this type of payment technology also dovetails with the trend towards a touchless guest experience that many hotel properties are working towards such as virtual check-in and virtual room keys.