From a B2B perspective, the online distribution channel is a legacy constraint that prevents innovation in the payment space, according to Voxel’s Xavier Ginesta.
First Published 10th March, 2021
Xavier Ginesta, Chairman at Voxel, spoke about a streamlined B2B payment ecosystem via a payment standard, being facilitated by the OPA (Open Payment Alliance) at the ATPS Payouts and B2B Payments Update .
Explaining the current situation in the indirect hotel booking scenario, he referred to a typical flow chart where an OTA, a tour operator or any other company send a hotel a booking (facilitated by a booking engine and a credit card), featuring channel manager or GDS plus tools like PMS and CRS. “Generally that’s how payments go with bookings,” said Ginesta. The travel company or a hotel acts as a merchant of record. Among the limitations, this channel generally neither supports alternative forms of payment nor any kind of instructions according to how the payment needs to be executed (invoice, maximum spend that can be charged etc.) , mentioned Ginesta.
How about a standard that would allow to send more information along with the booking so the payment can be orchestrated more automatically and more sophisticated things can be done as far as the payment is concerned? “From a B2B perspective, the online distribution channel is a legacy constraint that prevents innovation in this space,” said Ginesta. Companies associated in the booking flow are not payment specialists, they are distribution specialists. “Making them change their processes in order to support more sophisticated form of payments or payment workflows in not in their best interest, that’s not something they are going to invest in…”
Solution – removing payments from distribution
A vital aspect of the Open Payment Alliance architecture is a hub which upon receipt of a payment instruction from a travel company, automatically orchestrates a sophisticated payment workflow, involving different payment service providers and forms of payment (VCCs, bank transfers, digital currencies, etc.). “The idea advocates the decoupling of the distribution and the payment channels,” said Ginesta.
The hub, the Payment Manager, is responsible for guaranteeing that the funds will flow seamlessly from the travel company’s bank account to the supplier’s in due course according to the terms set forth in the payment instruction. “The Payment Manager is to payment, what channel managers are to bookings,” said Ginesta.
Using the new set of APIs, a travel company can send payment instructions to the hub and direct how payment needs to be executed. So the name of the hotel that needs to be paid, the currency and amount, payment terms, the timing of the execution, whether invoice is required or not etc. and the role of the Payment Manager is to interpret instructions and orchestrate the execution through an ecosystem .
Rebuilding trust
According to Voxel, the initiative is going to be vital in terms of rebuilding trust between OTAs, bedbanks and hotels.
On one hand, it will pave way for automation of B2B payment processes and result in an assortment of payment methods. On the other, the standard will also allow for more flexible payment terms to be agreed between the parties, cutting down on risk and make it unnecessary for insurers to involve themselves in the process.
Top 10 predictions for the next 10 years
Ginesta also spoke about what to expect from here on:
- B2B payments efficiency, risk mitigation and transparency will become the top 3 trending topics and the Payment Manager will facilitate all.
- Payment Managers (PMs) will handle over 80% of B2B payments and a maximum of 3-4 (PMs) will garner over 80% of the market share.
- PM will become more “intelligent” over a period of time and take decision on behalf of travel companies.
- VCCs will continue to be the predominant form of payment, but alternative forms of payment will prevail in low risk transactions between known parties.
- Payment processing costs will sink and rebates will vanish.
- End-to-end frictionless payment processing will be the new normal.
- PMs’ merchant of record capabilities will pave way for B2B payments centralization and eventually resulting in guest-centric B2C payments.
- Legal regulations will push electronic invoicing as a transparent and good governance mechanism in B2B payments.
- Watch out for the impact of PMs on commissions payments
- PMs will eventually become a sort of hospitality BSPs.
By Ritesh Gupta,
Ai Team
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