Speaking at the ECTAA Travel Payment Summit in Brussels, Sami Doyle, CEO of TMU Management, highlighted that protecting the money two or three times adds unnecessary expenses for travel businesses and leads financial service providers to increase the costs for handling payments, placing a burden on the industry and its sustainability.
Doyle said: “Current rules on consumer financial protection of package holidays lead to double or triple protection of payments while agents, operators and banks remain exposed to financial risk.”
The CEO of the data-driven insurance intermediary went on to say there are challenges around risk in the sector that are overlooked.
“While payment terms between intermediaries and suppliers are not subject to regulation, a tour operator must consider financial protection of the customer and the risk with the supplier.
“Uniquely, financial exposure in the travel sector can be up to 18 months and the risk burden is all over the place. This makes the payments process expensive and cumbersome.
“In the UK, ATOL protection is offset by card protection, with card use incredibly high and backed by chargeback protection which creates a risk for acquirers.”
He said: “The risk of chargebacks, when consumers seek repayment of transactions, leads acquirers to add security terms to their payment charges
“A tour operator or agent needs an account with an acquiring bank and a bond or scheme to cover the risk. It may also have insurance, even though it’s the same risk being covered. Meanwhile, the increasing use of ‘virtual’ cards online adds further risk and creates rolling credit settlement that is expensive.”
Doyle also criticised the European Commission’s proposals to limit package holiday prepayments and warned that “creating a single regulatory regime in the EU with restricted prepayments and another in the UK without it would create a commercial rift where one market has a benefit over the other.”
“Instead, we should remove the duplication through the use of technology so we know where the money and the risk is,” he said.
“The UK Civil Aviation Authority’s proposals for ATOL reform include the segregation of customer payments to ensure more visibility of where the money is. We need to look at cover across the entire chain. We must bring everything together in one system and have clarity on who holds the exposure.”
