“Sunday night is when it will break loose.”
That's when Sykes Enterprises business travelers try to
check in using virtual cards en masse. “We’ll get a call from someone stuck in
the lobby because [the hotel] won’t accept the virtual payment,” said Sykes Enterprises
director of global finance and travel services Alan Mazzola.
It turns out the very same features that lend virtual cards
their lauded security also can cause havoc at the check-in counter, where hotel
systems and staff may not know how to process them.
Sykes has used U.S.
Bank Travel VirtualPay since July 2013. Backed by payment company
Conferma, it integrates with the Sabre global distribution system. Since Sykes
switched from a pre-pay-and-fax model two years ago, the number of Sykes
travelers who've had trouble checking in has sunk from 60 percent to about 25
percent, but Mazzola wants that number to drop to zero.
Others in the industry share the same goal, especially as
virtual cards become more prevalent and as more suppliers develop their own versions.
With the help of banks, card networks, global distribution systems and virtual
card providers, global trade association Hotel Technology Next Generation
released the Virtual
Payment Cards Specification industry standard in May to help hotels both distinguish
virtual cards from traditional cards and process them efficiently.
“When the whole virtual card concept was created and started
being used, the business and technical processes to handle the different
payment type really weren’t thought about and implemented,” HTNG COO David
Sjolander said. “The problems are getting worse for the hotels, so we’ve
stepped in to try to help resolve some of those problems.”
The Problem Virtual
Cards Solve
Companies don’t want the credit liability of issuing corporate
cards to every person traveling on the company's dime, particularly infrequent
travelers, contractors, freelancers or job candidates. Not all individual
travelers, however, have the personal credit or funds to front the costs of
travel.
Other solutions exist, but reconciliation can be a nightmare
and noncompliance and fraud rates are high. Central travel accounts, ghost
cards and lodge cards, for example, can fund large-ticket items like air and
lodging. Trans Marine Propulsion Systems, for one, has issued thousands in cash
advances based on the U.S. General Services Administration’s per-diem rates.
Others charge large-ticket items to one
manager’s corporate card.
Virtual cards, though, allow companies to issue one-time-use
credit card numbers electronically. These pay for air and lodging under specific
circumstances, down to the traveler, amount, merchant and dates, reducing the possibilities
of fraud or misuse by employees. And the fact that each virtual card number ties
to a specific transaction simplifies the reconciliation process.
The technology automatically faxes the virtual card number and
processing details to the hotel. Products like CSI Enterprises’ globalVCard
additionally send those details to the traveler’s smartphone so the traveler
can show the front desk clerk or refax with a click.
The Problems They
Create
“There is no systematic way to identify a virtual card from
a traditional card. All a hotel sees is a reservation that has a card number in
it," Sjolander said. But the card manager's ability to specify the
traveler, amount, merchant and activation and expiration dates creates “special
rules” for processing. These specifications form the biggest problem, according
to CSI vice president of travel Juliann Pless. “[Hotels] don’t know that those
settings are on the card when it arrives, so they think they can run it like a
normal credit card,” she added.
Consider that a test charge to check the card's validity
won't work if the manager set the activation date for later. Or that test
charge could use up a single-use card's available use. Another difference in
how to handle virtual cards: Hotel staff should create a second folio for
incidentals if the virtual card covers only the room and tax, suggested U.S.
Bank head of emerging markets and strategy for corporate payment systems Nicole
Tackett, who's also a member of the HTNG working group that produced the new
virtual card specifications.
Some travel agencies and GDSs fax or email processing instructions
to the hotel, but “that’s obviously very inefficient and presents lots of
security problems,” Sjolander noted. Tackett added that high turnover among
front-desk staff makes training difficult. To protect against hotels losing the
card info, Sykes gives a hard copy of the fax to travelers, and Mazzola said
hotels accept them 95 percent of the time. “But that’s the extra step we were
told not to do because it breaks the security of the card,” he pointed out.
Anytime a virtual card is declined because of a processing miscue
between the issuer and the hotel staff, it leaves the traveler unable to check in
until a new virtual card is issued or another form of payment is secured. So
Sykes has someone on call on weekends to ensure travelers don’t get stuck. The
company also created a dated queue for bookings reserved more than two weeks in
advance. Sykes faxes the authorization form to the hotel only as the check-in
date nears to reduce the amount of time the hotel has to misplace it. Despite
these efforts, it's not an exact science. “Whenever we issue [a virtual card],
we just hope for the best,” he said.
Travel plans that change also create a reconciliation
problem for virtual cards, Mazzola said. If a hotel runs payment immediately
after receiving the card and then the traveler cancels the reservation or
checks out early, the hotel may not refund the difference automatically. This
happens only 5 percent of the time, he said, but the only way to avoid any
overcharge is to check everything. “Now we’ve paid for a stay that someone has
not been there for. The only way we’re able to catch it is to go through the
report at the end of the month and match it with what was booked in the GDS.”
Supplier Stumbling
Blocks
A Global
Business Travel Association survey conducted in February found that 53 percent
of suppliers accept virtual cards: a majority, yes, but a slim one. According
to GBTA, "It is clear that buyers notice when their payment solution is
widely accepted and that it becomes a major problem for them when it is
not."
In Mazzola’s
experience, larger chains are less likely to accept virtual cards. One of the
largest, Marriott does accept virtual cards, but it requires companies to fill
out an authorization form. That, Mazzola said, “defeats the purpose of the
virtual card,” an extra step virtual cards are supposed to eliminate.
He said his company asked a Marriott near Sykes’ U.S.
operations headquarters in Denver to forgo the form. “I … let [Marriott] know
how disenchanting this is because virtual card is here and it’s been such a
saving grace with the industry, so we need to have it accepted,” Mazzola said. Marriott
declined to comment but, according to Mazzola, “won’t budge.” So, toward the
end of March, Sykes banned employees from booking the property, despite the
convenience of its location.
The Standard That
Could Solve It All
Sjolander doesn't blame hotels for disliking virtual cards. “No
one thought about them when they created it,” he said. But the HTNG industry
work group created the Virtual Payment Cards Specification with hotels in mind.
It's been working on ways for hotels to distinguish the cards since August 2014,
such as transaction fields that automate the processing instructions that
buyers and TMCs now fax and email to hotels.
The standard, however, is not mandatory, and a lot of links
in the chain have to adopt it for the initiative to prove effective. “There are
about four different systems handing off information to each other [such as
property management systems and GDSs] and they will all have to support these
standards for the information to be communicated from one end to another,”
Sjolander said. “What typically happens is the hotel community pushes vendors
to adopt the standards and you get to a point where the hotels won’t buy a
system anymore if it doesn’t meet their needs.”
Now, HTNG is updating the Hotel Electronic Distribution
Network Association’s hotel handbook for virtual cards and standardizing so Web
bookings, modifications and cancellations all come through the API the same way,
said HTNG working group member Lyndsey Tufo, travel product solutions manager
for Wex.
Regardless of virtual cards' dilemmas, the benefits far outweigh
the obstacles. Virtual cards have decreased reconciliation nuisances and fraud
and provided travel managers an alternative to issuing corporate cards. For all
these reasons, use of single-use virtual cards is on the rise. The GBTA survey found
that use of single-use virtual cards rose 7 percentage points from the prior
year to 20 percent. And those travel buyers “tended to be satisfied” with the
product.
“We don’t get a lot of complaints,” said Tufo. “It’ll just get better as time goes on.”