A decade after the idea surfaced, payment network UATP will
allow travel management companies to issue UATP payment accounts. BCD Travel is
the first. It will launch with a U.S. test group internally and then roll out
to all U.S. clients, possibly next quarter.
In typical payment networks like Visa, Mastercard and
American Express, banks are the ones to issue payment cards. In the proprietary,
airline-owned UATP network, airlines until now have been the only parties to
issue its centralized lodge accounts. "It's a very progressive move by the
UATP board because traditionally, there was sort of that love-hate relationship
between airlines and GDS, airlines and TMCs, and so here you've got a case
where the airlines are allowing access to the UATP network ... for entities
that are not airlines," said president and CEO Ralph Kaiser.
There are benefits for airlines in the closed model. For
airlines that are both the merchant and the UATP account issuer on the same
transaction, the transaction is free. Delta, as an example, would pay no
transaction fee for the purchase of a Delta ticket paid for with a Delta-issued
UATP account.
Additionally, airline issuers can receive commissions on the
interchange fees that merchants pay account issuers. If a passenger used an American
Airlines-issued UATP account to buy a United flight, for example, American, as
the account issuer, could receive commission on the interchange fee paid by
United, the merchant. UATP merchants include most of the world's airlines, many
rail carriers, 12,000 Airlines Reporting Corp. travel agency locations and
130,000 other travel agency locations, according to UATP.
Among benefits to TMCs and their clients, according to
Kaiser: UATP billing statements include Level 3 transaction data like airline,
city pair and class of service that can flow to TMCs' corporate customers. TMCs
also now are in a position to gain some interchange-fee commissions. UATP,
meanwhile, still gets a revenue share, Kaiser said, to cover costs for the
airline owners.
"The fact that a TMC is engaging in issuing the cards
is not surprising, given that they want to be the one-stop solution [and] have
tighter control/audit/reporting on the payment process," said Get Travel
Solutions founder Karoline Mayr. "And it is a very nice new revenue stream
that conveniently is entering at the time of distribution disruption. ... Payments
is a great revenue stream, working like a licensee deal where they make money
off of every transaction; it appears like a small amount off each transaction,
but as you look at the total number of transactions, you no longer feel like it
is small."
The downside for airlines: With more issuers in the UATP
arena, fewer of those "free" transactions will occur in which the airline
issuer and the airline merchant are the same entity. Kaiser noted, however, "The
more UATP accounts available for airlines to accept, the less they'll pay in
merchant fees." That's because UATP's merchant fees are lower than other payment
networks' transaction costs, generally by about 1 percent, according to Kaiser.
If TMCs can funnel significantly more airline transactions
to UATP accounts, the relationships between TMCs and airlines also could thaw a
bit, and mega TMCs like BCD are the best-positioned to make a noticeable difference.
"This probably came up over a decade ago and there was
not a lot of interest within the airline industry, but more recently, we
brought it up again because things evolve, markets modernize, so we thought it
would be a good time to consider it," Kaiser said. "The airlines need
to accept more lower-cost forms of payment, and so, if we can have a
distributor like a TMC put more accounts in the network ... that's a good
thing, and I think the airline industry finally realized that opening up the
network to other entities could actually be a net benefit instead of worrying
about, "Oh, are we giving a benefit to a TMC? We don't like to do that.'"
According to a press release from BCD and UATP, BCD corporate
clients' traveler profiles will signal BCD to use BCD-issued UATP accounts when
booking with relevant merchants. Also according to the release, "BCD will
help manage their clients' UATP program and provide customer service."
Kaiser said UATP is open to speak with other U.S.-based TMCs
about the TMC issuer program, and he expects to announce more TMC participants
before the end of the year.
Updated at 2:40 p.m. Eastern on Oct. 25, 2019 to incorporate comments by Get Travel Solutions founder and principal consultant Karoline Mayr and to reflect an accurate number of ARC travel agency locations that are UATP merchants.