‘Chargebacks are both a problem and opportunity’

Travel firms continue to have to deal with chargebacks on card payments but some have struck back at customers seeking ‘double recovery’ and others are using chargeback rules to chase airline refunds. Krystene Bousfield, head of

debt recovery at law firm Travlaw, said: “We see a lot of individual customer claims. The chargeback issue kicked off ridiculously in the past 12 months.” But she told a Travel Weekly

Future of Travel forum: “Where we see customers getting double recovery – maybe they were accidentally paid twice through a refund credit note and issued a chargeback – we’re seeing more clients say ‘They’re not entitled to this.’ So they’re sending letters

BUSINESS NEWS Finance experts discuss the key issues affecting firms’ liquidity. By Ian Taylor

Krystene Bousfield

‘More merchant services providers are demanding extra guarantees’

Businesses face growing cost pressures from payment services providers seeking extra security. Krystene Bousfield, head of

before action or issuing claims.” Bousfield said some larger travel

clients are also issuing chargebacks themselves on card transactions with suppliers. She explained: “If a company pays an airline with a company card, they can be entitled to chargeback rights. “Someone might have made

hundreds of thousands in company card payments to an airline. The airline isn’t refunding them and clients are using the chargeback process to claw back as much as they can. We’re seeing success using the chargeback process in that way.”

debt recovery at Travlaw, said: “A lot of merchant services providers [MSPs] don’t take any comfort from a bond with the CAA or Abta. They are asking for a huge bond in addition, looking to cover themselves 100%. We’ve gone as far as seeing directors being asked for personal guarantees.” Bousfield said: “I appreciate

MSPs need to protect themselves. If there is a failure, claims often get pushed in their direction, but it’s another layer of pressure for clients.” However, Chris Photi, head of

travel and leisure at White Hart Associates, argued: “Nobody held a gun against MSPs’ heads to write

the business. They’ve taken the rewards of the charges and now they find themselves with a huge issue and want to cover it.” He said: “You have these

conflicting stakeholders who all want to protect their piece. What we’re seeing more and more is ‘Sorry, find a new merchant acquirer.’ That is not easy. There are some alternatives, [but] obviously, they are setting up security which is going to be restrictive on liquidity.” Adam Pennyfather, head of

financial consulting at the Travel Trade Consultancy, said some businesses “don’t have the choice” of changing merchant facilities, arguing: “Some MSPs have served notice [and] clients have been forced to look at the market, but the terms are generally not favourable.”

‘Cash is key for business survival’

Cash remains the priority for businesses this spring, especially if the sector’s restart is delayed, say industry financial experts. Leading industry accountant

Chris Photi, head of travel and leisure at White Hart Associates, told a Travel Weekly Future of Travel forum: “Cash is almost the only consideration over the next month or two.” He argued: “The industry

has been unbelievably resilient. I certainly expected more failures than we’ve had, although there are some in the pipeline.” But he insisted: “The immediate

priority is still cash. Thereafter, it’s going to be about what your balance sheet looks like.” Photi warned: “The industry

needs a summer season. It can’t go

through another year with no season. Are we going to get a summer holiday season – from the end of July through to the beginning of September? The industry needs that, [but] there is a question mark over it at the moment.” Adam Pennyfather, head of

financial consulting at the Travel Trade Consultancy, agreed saying: “The priorities are liquidity and cash management for the next few months. “There are certain hurdles. If

you took a Coronavirus Business Interruption Loan Scheme (CBILS) loan out early you have repayments kicking in. You have VAT deferral repayments kicking in. Furlough has been extended, which is a help, but that will be taken away in future. These financial hurdles need to be managed and could pose a problem

if we don’t get clarity and bookings don’t start to come in.” Repaying the debt businesses

have taken on should not pose an immediate problem. Pennyfather said: “It depends what debt you’ve taken on, but the ability to extend bounce-back loans is useful and CBILS have a five-year term.” However, he said refinancing the

loans “would be difficult”, arguing: “Refinancing with something more commercial would be a challenge and then you’re subject to different assessment by lenders. That is the biggest challenge.” Photi argued: “There is still a

potential opportunity for government- supported lending. A lot of people had the scope to take out more [money]. I would have erred on the side of taking out as much as possible.”

Catch up with all the Future of Travel sessions: futureoftravelspringforum

1 APRIL 2021 39

Chris Photi

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