The travel sector represents a vast and rapidly expanding payments ecosystem, supporting nearly 590,000 businesses and contributing approximately 9.1% to global GDP. For travel businesses, particularly Online Travel Agents (OTAs), efficient payment management is paramount to success in this market – and transacting across currencies can have dramatic impacts on cost. This is where currency-matched accounts come in.
In this blog we will discuss:
- The FX challenge within the travel sector
- Advantages of Electronic Money Institution (EMI) accounts for travel businesses
- The impact of currency-matched accounts on travel businesses
The FX challenge within the travel sector
For obvious reasons, travel businesses operate in a global marketplace, and even individual customer bookings can require OTAs to make supplier payments across multiple currencies. This international scope poses various financial challenges, including currency fluctuations, foreign exchange (FX) fees, potential tariffs and charges, all of which can significantly impact the fine margins of a travel seller.
On-demand currency-matched accounts offer a solution to these challenges, enabling travel businesses to create virtual accounts in specific currencies in order to manage payments to and from different ones more cost-effectively and with greater precision.
What’s more, currency matched accounts make it possible to scale those efficiencies dramatically, thanks to all the qualities inherent in automated embedded payment systems.
When accounts are combined with Virtual Credit Cards (VCCs) as a payment method, for instance, travel businesses can leverage essentially unlimited numbers of regional tailored payments to ensure more effective, secure, cost-efficient bookings for themselves and their customers.
Advantages of Electronic Money Institution (EMI) accounts for travel businesses
While many 'virtual' accounts are actually underpinned by a single physical master bank account from which transactions are debited, Modulr accounts are not. Instead, they are independent, and require individual funding or balances to be held within them.
Modulr offers EMI accounts in 11 currencies: GBP, EUR, USD, CZK, DKK, NOK, PLN, SEK, CHF, HKD and JPY. These can be created with unique account numbers for both UK and across the EEA regions with a choice of in-country International Bank Account Number (IBAN), a code that helps overseas banks check accounts’ validity.
Access to IBAN-specific accounts in different currencies helps travel businesses to address unfavourable FX issues, by allowing them to fund and manage payment in the same currency as a given transaction. This reduces the necessity for currency conversion at point of transaction and the associated costs of unfavourable rates for the OTA and/or provider.
EMI accounts are easy and quick to create, and together with VCCs, can allow highly tailored, secure, scalable payments to be made automatically in a huge array of scenarios.
This can provide several key benefits for travel businesses:
- Cost Efficiency: By relying on currency-matched accounts, travel businesses can significantly reduce FX fees and charges across thousands of customers and payments.
For instance, an OTA processing daily bookings can achieve substantial savings by avoiding multiple currency conversions when funding and at the point of VCC transactions. OTAs can streamline their treasury operations, performing FX on a gross currency payment requirement.
This means funding accounts and processing each payment through an optimised ‘right currency’ account instead, with its own VCC unique to the transaction. - Improved Cash Flow Management: The ability to hold funds in multiple currencies within their own EMI accounts allows travel businesses to tailor their cash flow in terms of currency requirement, which is especially useful where timely access to the right funds can have a big impact on a booking succeeding or not.
- Resilience Against IBAN and BIN Discrimination: Some travel booking systems have regional preferences or flag certain currencies as higher risk. Travel businesses can reduce the risk of payment rejection leading to a failed booking by choosing accounts with IBANs offering a reduced chance of being discriminated against in transactions.
Similar challenges exist with VCC BINs – the Bank Identification Number denoting the card issuer, which can be used to check what region a card was issued from. Modulr issues VCCs across a range of country associated BINs, as well as cards offering different interchange rates, allowing travel businesses to counter unfriendly BIN blocking and surcharging strategies that may come when booking a flight, for example.
- Enhanced Buyer-Seller Experience: As the OTA can ensure the travel supplier receives funds in their desired currency, the chance of a failed, disputed or rejected payment can decrease, and with it the potential for charges or inflated prices being passed on to the customer.
The impact of currency-matched accounts on travel businesses
Global VCC transaction revenue is projected to boom, increasing from £32.7 billion in 2023 to £128.9 billion by 2028, by when it will be generated through a staggering 175 billion transactions. A key factor driving this growth is the security and surety of charges that VCCs offer.
Modulr offers an extensive range of virtual cards across both Visa and Mastercard networks and can create VCCs instantly, with funding limits or expiration controls to reduce manual intervention and the associated risk of errors, as well as risks around fraud or misuse.
The advantages of VCCs scale accordingly when combined with tailored EMI accounts. Modulr's platform provides instant account issuance and 24/7 access, allowing businesses to open, issue, and manage accounts in real-time, while receiving payment processing, automated reconciliation and detailed reporting. This immediacy is crucial for OTAs, where fine margins and extensive competition mean losing customers at or near checkout can prove extremely costly.
Ready to revolutionise your travel payments? Learn more about Modulr's travel solutions.
