Travel agents encountering rejected virtual credit card (VCC) payments or unexpected ADMs may be running up against airline card-acceptance rules based on IATA Resolution 890 – rules that industry experts argue have not kept pace with modern payment technology.
IATA’s Resolution 890 governs the use of payment cards by accredited travel agents for passenger air sales. Among its provisions are restrictions on agents using cards issued in the agent’s name, VCCs, as well as certain customer payment cards without explicit consent from the airline, ASATA CEO, Otto de Vries, previously told Travel News.
According to the experts, airline distribution systems and payment gateways can assume that certain transactions are using prohibited cards or payment methods based on transaction patterns from each agency and certain credit card numbers, which can identify the card issuer.
“Airline distribution systems and payment gateways can't identify these cards because the name of the cardholder is not an attribute passed on in the system. What they do see are patterns that can be used to identify prohibited cards,” explained Paulina Klotzbücher, CEO of GlydePay.
“If the airline sees many transactions going through on the same card or on the same Bank Identification Number from a specific agency, they deduce that it’s an agency card and impose an ADM.”
Klotzbücher added that some specialised card programmes were also relatively easy to identify. These include MasterCard’s Wholesale Program (MWP) cards, which include VCCs generated for specific B2B transactions.
Franz Von Wielligh, Head of Innovation and Member Support at XL Travel Head Office, explained that credit cards’ BIN – the identifying digits at the beginning of a card number – can also help airlines identify card issuers.
“Virtual cards used by travel agencies come from a small handful of well-known issuers, and their number ranges are no secret. The airline recognises them instantly. The airline's computer looks at those digits, recognises that it is a virtual card from a travel-industry VCC provider and blocks it.”
Outdated rules
Klotzbücher and Von Wielligh argue that the concerns underpinning restrictions on agency cards need to be reconsidered as payment technology evolves.
“Resolution 890 was written in an era when credit cards were plastic, reusable and easy to abuse. A modern virtual card is nothing like that. It can only be used once, for a set amount and, often it can only be used by a specific merchant. The chance of it being misused is close to zero,” said Von Wielligh. “So if the old fears no longer apply, why do airlines still block them?”
Klotzbücher believes processing costs are an important part of the equation, as different card products can attract significantly different merchant fees.
“All cards are not made the same. Some are very expensive and some are very cheap. Airlines should start looking at what costs they are prepared to accept rather than who owns the card,” said Klotzbücher. “Surely it's better to accept a cheaper card from an agency with zero fraud risk, compared with a more expensive card from a customer with higher risk of fraud.”
Corporate payment friction
Corporate clients and TMCs are increasingly relying on automated virtual cards, so the strict enforcement of Resolution 890 can cause friction.
“Big companies don't send their staff off with personal credit cards any more. They use TMCs, which pay airlines through automated virtual card systems. It's slick, it's traceable and it feeds directly into the company's expense reports,” said Von Wielligh.
“When an airline blocks those virtual cards, the whole automated system breaks. The TMC has to fall back on messy manual processes. Reports don't reconcile, travellers get inconvenienced and smaller travel businesses that rely on a bigger agency to issue their tickets get hit with ADMs they can't afford.”
Klotzbücher said the restrictions could also create difficulties for agencies that received payment from clients before issuing tickets but did not have access to full BSP cash facilities.
For example, where a corporate client pays an agency by EFT or another payment method, the agency may then use its own company card or generate a VCC to issue the ticket. Because the card belongs to the agency rather than the customer, its use may fall outside an airline's permitted card policy unless the airline has authorised it.
“If the agency tries to pay by VCC, Resolution 890 blocks it, but if the agency pays by cash, IATA demands massive financial guarantees because it increases default risk,” said Klotzbücher.
What can agents do?
Agents do have alternatives, although the experts say these can bring their own complications.
Von Wielligh said agencies could get written permission to use an agency card from the airline in the form of a TIP (Transparency in Payments) agreement. “The TIP basically says that agents can use their own cards but only if the airline agrees first. Get that agreement, keep it on file, and you're safe.”
Alternatively, solutions such as IATA GoLite and EasyPay are prepaid accounts that an agency will load money into so that IATA can settle with the airline.
“Agents can use IATA EasyPay but it does pose funding issues,” explained Klotzbücher. “The account can only be used for certain merchants and airlines and it locks working capital for the agency. Refund processing is also a major issue.”
The experts also pointed to traditional lodged-card arrangements as an option in some circumstances, although these can involve additional data-management requirements.
Time for another look?
Many of these issues with payment methods would be resolved if IATA refined the Resolution’s wording, took into consideration the security of modern payment methods and was more transparent about the processing fees that they were prepared to accept.
“Resolution 890 needs clearer wording. The current rule talks about cards belonging to ‘any person permitted to act on behalf of the agent’. Airlines are stretching that phrase to cover situations it was never meant to cover, like an independent consultant paying their host agency's invoice with their own company card,” said Von Wielligh.
Additionally, virtual cards should be treated individually and not lumped in with old-style agency cards because they do not carry the same risks, emphasised both Von Wielligh and Klotzbücher.
Lastly, both experts said that airlines should be more transparent about the fees and charges they were willing to accept. Von Wielligh noted that this could be done out in the open through TIP instead of being disguised as a compliance issue.
“Resolution 890 says the airline's card machine is for customers, not for agents. Virtual cards blur that line. Modern payments blur it further and, until IATA rewrites the rule to match how the industry actually works today, agents need to get written permission before they use any card that isn't the paying customer's own,” said Von Wielligh.
