Corporate buyers and travel management companies can expect to see a surge in the use of virtual cards to pay for hotel accommodation after Strong Customer Authentication (SCA) is enforced on 14th March as part of the EU’s Payment Services Directive (PSD2), according to HotelHub, a leading hotel technology solution in the corporate sector.
The practicalities of SCA in the business travel environment will also mean travel arrangers are likely to move away from using online booking tools for hotel transactions and instead contact their travel management company (TMC) to make the booking offline, HotelHub forecasts.
SCA is a new set of rules that changes how credit and debit card holders confirm their identity when making online purchases to help protect them from fraud. Cardholders booking travel online will often 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. Enforcement of SCA presents challenges 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 also believes that SCA enforcement will accelerate the evolution of technology to handle hotel payments in the business travel environment. This includes development of virtual card (VC) products for the individual traveller, not just the corporate organisation or TMC, plus greater use of mobile wallets such as Google or Apple pay for hotel payments.
Meierhans comments: “As virtual cards are exempt from the SCA enforcement, it’s possible to imagine extending the virtual card concept to individual card holders but there might be challenges with such a development because there is a finite amount of 17-digit card number combinations. The increase in use of VCs by corporates and TMCs is already generating a lot of 17-digit numbers.” One answer to that, Meierhans suggests, could be for card providers to increase the number of digits for a credit card, but that means significant changes throughout all the card payment processing hardware and software, and is unlikely to happen in the short term.
“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,” added Meierhans. “In fact, 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, virtual room keys, to make everything as convenient as possible for the business traveller.”