The edge in B2B payments: How virtual cards offer more for travel

In just a decade, virtual cards have evolved from a tech novelty to a powerhouse for travel suppliers. As commercially minded agencies seek seamless, automated payments, the surge in virtual card transactions is only set to grow.

The global value of virtual card transactions will reach $6.8 trillion in 2026, from $1.9 trillion in 2021. Travel merchants, including airlines, travel advisors, online travel agencies, tour operators, hotels and car rental companies, are in line to receive powerful benefits that change how they do business.

Travel agents are one of the most critical stakeholders in travel. Often, they own the relationship with the traveler who relies on them for recommendations, convenience and post-booking support. But in managing the travel supply chain - from airlines to hotels to restaurants to spas - they are also the guardians of the traveler’s experience. Agencies stand to benefit from virtual cards that improve travel on the ground and business operations in the office.

What is a virtual card?

In the realm of B2B transactions, virtual card numbers function as a payment option typically issued for the purpose of paying a specific amount in a chosen currency to a designated merchant. Every virtual card is equipped with a unique 16-digit virtual card number a three- or four-digit CVV number and an expiration date.

Virtual payments allow businesses to issue a unique virtual card number that stores all transaction data, such as payment information and purchase details. Because virtual card numbers are digital, travel intermediaries can organize and manage them in granular ways, unlocking new capabilities.

When travel buyers, such as travel agencies, use virtual cards to pay travel suppliers in a business-to-business transaction, virtual payment solutions allow travel buyers to obtain virtual cards from multiple issuers through a single integration. 

Pass-through vs. merchant of record models  

Virtual cards have become a critical conduit for travel providers as they transition from transaction processors to experience purveyors. Under the more traditional pass-through model, they act as payment intermediaries, relaying customer payment information directly to the suppliers involved in the travel itinerary. In this scenario, challenges can arise, including:

• Risk of fraud as the customer’s credit card details go to multiple companies. 
• Risk to the agent’s reputation if the supplier mishandles the transaction or delays a refund. 
• Potential delays in receiving agent commissions from suppliers.
• Misalignment between the payment methods available to customers and those required by suppliers (especially in international travel).
• Currency fluctuations that can cause travelers to pay more than what the travel agency quotes.
• Time-consuming payment reconciliation with multiple suppliers. 
• Lack of insight into customer spending habits, preferences and other data.

In contrast, many travel agencies are shifting to a merchant of record model in which the agency collects all charges due from clients, authorizes the transactions and pays the travel suppliers tied to the booking. In this scenario, travel agents  can avert challenges through: 

• Reduced risk of fraud as the agent retains the customer’s credit card details.
• Reduced risk to the agent’s reputation by controlling all transactions and customer refunds.
• No delays in receiving commissions from suppliers as the agent can deduct its commission from supplier payments.
• Fewer challenges with payment methods as agencies and suppliers work out payment issues as part of establishing an ongoing business relationship. 
• No impact from currency fluctuations since a virtual card permits the travel agent to secure an exchange rate at the time of the booking.
• Easier supplier payment reconciliation. 
• Complete visibility so that travel buyers can easily track their spending and generate automated reports, which leads to better decision-making about how to allocate travel budgets.

One of the most significant benefits and unique features of virtual cards for agencies is enhanced spending control. Travel buyers can issue virtual cards for specific business-to-business use cases that they can determine, including:

• Single transactions or specific purchases with a spending limit.
• Multiple transactions within a restricted time frame (for the period of a business trip, for example).
• Payments to one supplier or category of suppliers (for instance, only hotels or only airlines). 
• Other payment scenarios with a combination of restrictions.

Giving travel buyers greater control over payments under the merchant of record model opens the door to deeper relationships with suppliers, enhanced cash flow, more revenue (travel agencies can offer customers lucrative buy-now, pay-later plans) and higher growth. According to Phocuswright and Mastercard, travel agents acting as merchants of record in the United States posted a 43% compound annual growth rate from 2020 to 2022.

Benefits of virtual cards for travel suppliers

Virtual Payments open new avenues for merchant of records, empowering them to expand their business and achieve greater success. The risk of fraud associated with virtual payments is much lower than with other payment types, including physical credit cards, checks and wire transfers. Physical card numbers are never revealed to suppliers, and virtual cards stop functioning when they achieve their goals.

Virtual cards offer merchants an extra layer of financial protection through guaranteed payments and refunds to travel service providers on both sides of the transaction. In addition, airlines receive payment from travel agencies at the time of the booking versus at two-week intervals under Billing and Settlement Plans.

Virtual payment solutions reduce payment processing time and effort across the supply chain. For example, virtual transaction reports automatically match invoices and remittances, which merchants can import into enterprise resource planning (ERP) and accounting systems to facilitate reconciliation. 

Less payment processing time means merchants and suppliers receive payments faster, reducing working capital costs and improving cash flow. Virtual payments lessen the need for merchants and suppliers to track down late payments or send out reminders and late notices and decrease the number of accounting and reconciliation errors.

Virtual cards provide benefits and guarantees across the travel supply chain - to buyers, such as travel agencies and intermediaries, and also suppliers, including airlines, hotels, car rental companies and tour operators.

Why airlines should embrace virtual cards 

Airlines, especially, benefit from virtual cards. Besides being a fully secure and flexible payment alternative, virtual cards allow air carriers to earn additional revenue from travel agencies that have exhausted their BSP/ARC credit lines.

With higher approval rates - 99.1% for virtual cards versus 85% for consumer cards – and less fraud, airlines enjoy reduced processing costs and effort.

Virtual payments allow airlines and travel agencies to agree on different pricing, levels and currencies (as not all relationships are equal) on some wholesale travel programs from card schemes.

Payments are the connective tissue that binds the travel ecosystem. And because momentum is moving toward efficient, secure and flexible business-to-business payments, virtual payments - the operational, security and competitive benefits of which outweigh the financial costs - are the next step in the industry's evolution. 

As a leading software and technology provider to the travel industry, Sabre knows how transformative it is for B2B travel businesses to be able to consolidate complex processes in comprehensive, end-to-end solutions. Sabre Virtual Payments, is a fully integrated, multi-channel solution that allows agencies and travel bookers to select the combination of banks, credit card schemes and funding solutions that deliver the most value to them and their business.

*Sabre Virtual Payments product management director Nicolas Ortiz contributed to this article.