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Conferma Pay made a bet in 2008 that business travel payments would become virtual, with single use Virtual Account Numbers (also known as VANs, or virtual cards) allowing travel buyers to reduce fraud by specifying the exact amount each virtual payment is valid for, and by moving payments from the reconciliation heavy one-to-many architecture you see with plastic cards, to a much more automated one-to-one set-up. While we¡¯ve seen a steady compounding of growth in hospitality, it¡¯s been a long and slow road for air purchases.

Head in to 2020, however, and several trends are converging that will usher in the tipping point, as barriers fall and the incentives for the industry to embrace virtual payments rise. Let me take each in turn.

Modernisation of travel distribution & payments

The structural changes on-going in both travel distribution and the payments industry point firmly to a virtual payment future. While the industry has been focused on NDC from a content consumption and business model perspective, relatively little has been said about how payments will work in this new world.?

The NDC schema requires the inclusion of a CVV number for each payment. This immediately renders traditional ¡®lodge¡¯ cards useless as a payment method for NDC bookings given these cards, by default, aren¡¯t designed with a CVV. More broadly, API-based consumption of NDC content means the payment experience is somewhat akin to booking an LCC on the web today and the methods we use are going to have move beyond lodge or traditional corporate cards as a result.

The second structural change is occurring in the payments world. The introduction of Strong Customer Authentication (SCA) requires all electronic payments within Europe are subject to two-factor authentication, and the travel industry needs to be compliant by the end of 2020. Again, this structural change asks more of today¡¯s legacy payment methods than they are able to deliver. By definition a lodge card isn¡¯t linked to a specific individual so it¡¯s not realistic that a named person is able to provide that more detailed authentication. But corporate travel is exempt I hear you ask?

Well, yes. Currently corporate payments such as lodge cards are exempt from SCA but it¡¯s important to understand the motivation of SCA, which is to make it near-impossible to practise card-not-present fraud online. We know from similar changes like the introduction of Chip & Pin that this will push fraudulent activity to more vulnerable areas, like corporate payments. Lodge cards have high exposure, often upwards of $250,000 and even today when made available in certain parts of the world are almost immediately compromised. With added focus from fraudsters it stands to reason that regulators are going to tighten up in this area. This will result in another major push towards virtual travel payments.

Are virtual payments feasible at scale??

Even with these structural changes the tipping point wouldn¡¯t be possible in some areas of the industry without changes to mid- and back office systems, most notably when booking air. As you¡¯ll likely realise an air ticket is issued from these mid- and back office systems, which as yet haven¡¯t been integrated with the virtual card ecosystem. This has been a significant barrier in the use of virtual payments, and, although the figure is much higher for hotels, we estimate less than 5% of air bookings are made using virtual cards today. But the industry has moved forward here in recent months, with key integrations between the likes of SAP Concur Compleat and a wide number of banks that issue virtual cards, not to mention Sabre¡¯s work in this area. The GDS just made it possible for native Sabre bookings to be issued through the Sabre host system, independently of the TMC¡¯s back office, with virtual payment and rich levels of data.?

This point might not seem glamourous compared to the change NDC is creating but for payments it¡¯s equally, if not more important. The fact that mid- and back office systems within TMCs can now ¡®call¡¯ for a virtual card is significant, but it also means a new modern link is created for critical air data to be transferred to banks. This includes PNR and ticketing data like the ticket number, full trip details as well as cost centres and project codes, which are critical for reconciliation. But equally important for corporations is on-time performance data from each flight delivered as part of the payment data so you can automatically claim compensation for late flights. Now this historic data barrier is all but gone it really does open the door for virtual payments when booking air.

Are virtual cards expensive?

The reconciliation and fraud benefits of virtual payments do provide significant value, but realistically virtual payments for air should be free for travel buyers to use, partly due to the established mechanisms for integrating a payment method in air, compared to the greater complexity in hospitality. And yes, you heard me correctly, we think virtual cards should cost the same for the travel buyer when booking air as a corporate or lodge card, and that¡¯s zero. We also think this is a realistic prospect in the near-term and will be driven by the banks. Many of our banking partners, including major players like Barclaycard, are now on record as saying their aim is not to issue any plastic at all in five years¡¯ time, on both the business and consumer side. Banks benefit greatly from the reconciliation and efficiency advantages of virtual payments and it¡¯s feasible they will bear the cost to make them free at the point of use, perhaps as early as 2020.

The odds on Conferma Pay's 2008 bet have narrowed considerably in the past few months. It¡¯s been a long time in the making but it will be worth it.