Travel-industry payments for Travel businesses.
Cardflo provides robust payment orchestration for travel businesses. We offer secure and efficient processing for airlines, hotels, and online travel agencies.
Our platform manages high transaction volumes, mitigates currency complexities, and optimises approval rates for global travel operations.
- Industry
- Travel businesses
- Category
- Travel
- Cardflo support
- Yes
The overview
Payment processing for the travel sector involves navigating complex transaction lifecycles, often characterised by significant delay between booking and service delivery. For airlines, hotels, and online travel agencies, the payments stack must handle high average transaction values alongside frequent cross-border flows.
These businesses typically rely on a mix of Merchant Initiated Transactions (MIT) and Customer Initiated Transactions (CIT), requiring robust tokenisation to manage deposits and final settlements.
At the architectural level, travel merchants often utilise multiple Merchant Identification Numbers (MIDs) to categorise varying risk profiles, such as flight bookings versus ancillary services. Integrating with global distribution systems and property management tools necessitates a gateway capable of synchronising data across disparate environments.
Effective travel payment management focuses on minimising false declines while adhering to Strong Customer Authentication (SCA) mandates under PSD2, ensuring that authorisation strategies are optimised for both security and conversion.
How it works
Initial Authorisation and Tokenisation
When a traveller initiates a booking, the gateway captures card details and performs an initial authorisation. To comply with PCI DSS and facilitate future payments, the card data is replaced with a secure token.
This allows the merchant to store payment credentials for later charges, such as room service or car rental extensions, without retaining sensitive data.
Smart Orchestration and Routing
The transaction is routed to an acquirer based on predefined logic, such as the traveller's location or the Merchant Category Code (MCC). By selecting the optimal path, businesses can reduce interchange costs and improve authorisation rates.
Smart routing ensures that if one acquirer experiences a technical outage, the payment is automatically redirected to a secondary provider.
SCA and 3DS Verification
For European transactions, the system triggers 3DS protocols to satisfy SCA requirements. The gateway determines if a transaction qualifies for an exemption, such as a low-value payment or a transaction risk analysis (TRA) exemption.
This process balances the need for regulatory compliance with the goal of reducing friction during the checkout experience.
Settlement and Reconciliation
Settlement occurs once the funds are transferred from the issuer to the merchant's account through the acquirer. In travel, where bookings are often made months in advance, reconciliation becomes critical.
The system matches clearing files with internal booking records, ensuring that every authorisation corresponds to a settled transaction and highlighting any discrepancies for manual review.
Why it matters
Managing Long Exposure Cycles
Travel businesses face unique risk profiles because the time between payment and service delivery can be months. This creates a longer window for chargebacks and disputes, which can impact a business's reserve requirements with their acquirer.
A robust payment strategy involves proactive representment and the use of soft descriptors to reduce friendly fraud, helping to maintain a healthy standing with card schemes while managing cash flow effectively.
Optimising International Acceptance
Global travel operations must process payments in numerous currencies and through various local schemes. Without an optimised cross-border strategy, merchants may suffer from high FX markups and increased decline rates from issuers who flag foreign transactions as suspicious.
By utilising local acquiring where possible and employing dynamic currency conversion, travel merchants can improve the customer experience and reduce the overhead associated with multi-currency settlement.
Regulatory notes
PSD2 and Travel Exemptions
Under PSD2, travel merchants must apply SCA to most electronic payments. However, specific exemptions for Secure Corporate Payment (SCP) can apply when bookings are made through secure corporate travel management systems.
Understanding these nuances is critical for travel agencies to maintain a low-friction booking process for corporate clients while remaining compliant with European banking regulations.
Card Scheme Rules for Travel
Visa and Mastercard have specific rules for the travel sector regarding when a transaction can be captured. Generally, the capture should not occur until the service is initiated or the ticket is issued.
Merchants must also handle 'no-show' charges according to strict guidelines, ensuring they have the necessary authorisation and can provide evidence that the consumer agreed to the specific terms and conditions of the booking.
Use cases
Online Travel Agencies (OTA)
OTAs aggregate services from multiple providers, requiring complex split-settlement capabilities. They must authorise a single payment from the customer and distribute funds to various airlines and hotels while retaining a commission, all while managing diverse cancellation policies.
Hospitality and Hotels
Hotels frequently use pre-authorisation at check-in to cover potential incidental costs. The payment system must support incremental authorisations and ensure that the final capture amount matches the actual expenditure to avoid unnecessary holds on a traveller's credit limit.
Airlines and Car Rentals
These businesses handle high-value transactions that often trigger fraud filters. They require sophisticated card-not-present (CNP) tools and the ability to process Merchant Initiated Transactions for changes to itineraries or post-rental damage charges without needing the customer to re-authenticate.
By the numbers
Typical uplift observed when travel merchants switch from a single-acquirer setup to multi-acquirer smart routing.
The industry standard threshold travel merchants strive to stay below to avoid card scheme monitoring programmes.
Potential savings on scheme fees when using local acquiring instead of cross-border processing for international bookings.
Related terms
Book a scoping call to see how Cardflo would set you up.
What's included.
- Multi-acquirer routing to improve authorisation rates for international travel bookings through local processing.
- Automated tokenisation for secure management of deposits, final payments, and ancillary service charges.
- Dynamic 3DS routing to apply SCA exemptions where applicable while maintaining regulatory compliance.
- Intelligent decline recovery logic to automatically retry soft declines and minimise lost travel revenue.
- Support for a wide range of alternative payment methods suited to regional traveller preferences.
- Detailed reporting on interchange fees and scheme fees to analyse the true cost of acceptance.
- Centralised management of multiple MIDs to separate risk across different travel service departments.
- Real-time fraud screening tailored to travel patterns to reduce chargebacks and friendly fraud instances.
- Seamless reconciliation tools that match booking references with settlement files from various card acquirers.
- Flexible settlement options to accommodate the long lead times between booking and travel dates.
Talk to an acquiring specialist about your MID setup.
Common questions.
How can travel businesses reduce chargebacks related to service cancellations?
Chargeback reduction in the travel sector relies heavily on clear communication and robust documentation. Merchants should ensure that cancellation policies are prominently displayed at the point of sale and that soft descriptors on card statements clearly identify the brand name.
In the event of a dispute, providing evidence such as signed rental agreements, hotel check-in logs, or flight manifests is essential for successful representment. Additionally, using tools like retrieval requests can help resolve issues before they escalate into formal chargebacks.
What is the difference between CIT and MIT in the context of hotel bookings?
A Customer Initiated Transaction (CIT) occurs when the traveller actively completes a payment, such as paying for a deposit during the online checkout process, requiring SCA.
A Merchant Initiated Transaction (MIT) is a subsequent payment processed by the merchant without the cardholder's active involvement, typically for the remaining balance or incidental charges.
To process an MIT, the merchant must have a valid mandate established during the initial CIT, and the transaction must be flagged correctly in the authorisation request to avoid declines.
Why do airlines often face higher interchange fees on corporate bookings?
Airlines frequently process business travel, which is often booked using corporate or commercial cards. Card schemes generally apply higher interchange rates to these card types compared to standard consumer debit or credit cards.
Furthermore, if the transaction lacks Level 2 or Level 3 data, such as tax amounts or ticket numbers, it may be downgraded to a more expensive category.
Implementing a gateway that can transmit this enhanced data can help in qualifying for lower interchange rates for B2B travel transactions.
How does smart routing help travel merchants with global operations?
Smart routing directs transactions to the acquirer most likely to approve the payment based on historical performance data and the geographic location of the issuer.
For a travel business, this means routing a transaction from a French traveller to a European acquirer rather than a US-based one, which significantly reduces the likelihood of an issuer flagging the transaction as high-risk or fraudulent.
This approach also helps in minimising cross-border fees and improving the speed of the authorisation process.
What role does the Merchant Category Code (MCC) play in travel payments?
The MCC is a four-digit number used to classify a business by the type of goods or services it provides. In the travel industry, specific codes exist for airlines (3000-3350), car rentals (3351-3500), and lodging (3501-3999).
These codes influence the interchange rates applied by card schemes and the risk assessment performed by the issuer. Using the correct MCC is vital for ensuring accurate processing and preventing transaction blocks from issuers who may restrict certain high-risk categories on their cardholders' accounts.
Can travel businesses use network tokens to improve security and conversion?
Yes, network tokens are a powerful tool for travel merchants. Unlike standard gateway tokens, network tokens are issued by the card schemes (Visa, Mastercard) and remain valid even if the underlying card is lost, stolen, or expires.
For travel businesses with long intervals between booking and travel, this ensures that the payment details remain current, reducing declines during final settlement. Network tokens also often qualify for slightly lower scheme fees and higher authorisation rates due to their increased security profile.
Related industries.
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