Antravia Research - Payment Control in Travel: Merchant Models, Credit Risk, and the Architecture of Payment Control

Explore in-depth white papers on payments, FX, tax, and finance in travel. Strategic research for hotels, agencies, and platforms. By Antravia.

ANTRAVIA RESEARCH & WHITE PAPERS

Mary Antravia

8/16/202511 min read

Table of Contents

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1. Executive Summary

Payment control is a strategic determinant of profitability and resilience in the travel sector. The structure through which funds move from the customer to the supplier and the contractual, operational, and regulatory frameworks that govern that flow, shapes cash flow, liability allocation, and competitive leverage. Decisions about who acts as Merchant of Record, how credit is extended, and which payment methods are supported have consequences that go beyond transaction costs, influencing liquidity, dispute exposure, and supplier relationships.

This paper examines the architecture of payment control in travel, drawing on operational case studies, market data, and regulatory frameworks to analyse the commercial and risk implications of different models. It identifies how Merchant of Record and non-Merchant of Record structures allocate control and liability, and why hybrid approaches, while flexible, introduce reconciliation complexity. It explores the operational centrality of reconciliation and data integrity, the systemic risks posed by unsecured credit extension, and the financial mechanics of chargebacks, refunds, and cancellation policies as instruments of risk allocation.

Emerging payment models such as real-time payments, Open Banking, Buy Now Pay Later (BNPL), and crypto acceptance are also assessed not simply for their cost profiles but for their impact on liquidity, regulatory compliance, and dispute handling. These models offer competitive opportunities when integrated strategically but add operational burden when deployed without corresponding adjustments to systems and contracts.

Key findings include:

  • Merchant of Record status increases settlement control but also working capital and compliance requirements.

  • Robust reconciliation systems are a prerequisite for scaling across multiple PSPs, payment types, and geographies.

  • Credit risk, if unmanaged, can destabilise even well-capitalised operators.

  • Dispute and refund policies must be designed as financial tools, not customer service afterthoughts.

  • New payment methods shift the “control map” of who holds funds, when, and under what liability.

The paper concludes with strategic recommendations for travel intermediaries and suppliers to align payment architecture with business model, market strategy, and risk appetite. By treating payment control as a cross-functional discipline, embedded in finance, operations, and commercial contracting, travel businesses can improve liquidity, reduce cost of acceptance, and safeguard margins in an industry where thin profitability leaves little room for error.

2. Introduction

In travel, payment is more than a transaction but constitutes a transfer of risk, responsibility, and reputation. Whether a customer pays a hotel directly, routes funds through a travel agent, or transacts via an OTA, the flow of money defines who is liable, who controls the relationship, and who bears the operational burden when something goes wrong.

Over the last decade, payment technology has accelerated, but the underlying models in the travel industry have not kept pace. Many travel businesses still operate without a clear understanding of their status as Merchant of Record, the legal boundaries of acting as an intermediary, or the full cost of fragmented reconciliation and cross-border transfers. Hidden FX fees, delayed settlements, platform-level data mismatches, and unexpected chargebacks continue to erode margin and undermine trust, particularly for operators who handle high volumes, multi-currency bookings, or complex supplier chains.

This paper takes a financial and operational view of how travel agents and hotels receive payments, examining the architecture that underpins each model. It looks beyond surface-level convenience and asks deeper strategic questions: Who really holds the funds? Who carries the risk? What are the implications of not being the Merchant of Record? And how can businesses structure their payment flows to protect revenue, maintain trust, and improve financial resilience?

Drawing on extensive firsthand experience in travel payments, FX, VCCs, and supplier reconciliation, this paper also explores current practices across leading platforms, anonymized case examples, and practical recommendations for agents, hotels, and intermediaries navigating a payment environment that is increasingly global, digital, and risk-sensitive.

3. Merchant of Record (MoR) vs. Non-MoR Models in Travel

In the global travel industry, the question of who receives and holds funds defines legal liability, trust, and the core business model. The Merchant of Record (MoR) is the party legally responsible for processing a customer's payment. This includes managing the transaction with the acquiring bank, issuing refunds, handling chargebacks, and appearing as the named entity on the customer’s credit card statement. While this role appears operational, it carries deep financial and legal implications and this is especially true in travel, where bookings are often cross-border, cancellable, and involve multiple counterparties.

What it means to be MoR

To be a true MoR, a business must not only process the transaction but also:

  • Assume liability for the provision of the service (or goods),

  • Appear on the cardholder’s statement,

  • Own the merchant agreement with the acquiring bank or PSP,

  • Have the necessary licenses and regulatory compliance in each relevant market.

In travel, however, this role is often misunderstood or bypassed. Some businesses route payments through third-party processors or collect funds “on behalf” of a supplier without assuming the full legal obligations of MoR. This distinction is not semantic. It determines who is responsible when something goes wrong.

Risks of not being MoR

When a travel business collects customer payments but is not the Merchant of Record, it often exposes itself to a grey zone of operational risk:

  • Lack of regulatory protection: Customers may hold the intermediary accountable despite the legal MoR status being elsewhere.

  • Chargeback liability confusion: If a chargeback is issued, but the non-MoR intermediary issued the invoice or confirmation, the liability chain becomes unclear.

  • Reputational damage: Agents and platforms that handle funds but don’t provide MoR-level service or protection are increasingly seen as untrustworthy by both partners and consumers.

  • Settlement disputes: Without full MoR control, intermediaries may be bypassed in refund, cancellation, or payment flows, thus damaging cash flow and customer experience.

Case Example: Platform rejection due to non-MoR Status

A payment platform servicing mid-sized travel agencies initially launched using an intermediary model. It routed customer card payments to suppliers, issued confirmations, and handled support, but it was not a legal Merchant of Record. Despite integrating a robust payment API and offering competitive rates, the platform was unable to secure partnerships with large OTAs and hotels. Key partners raised compliance concerns, noting that the platform’s lack of MoR status made chargeback liability and refund processes unclear. Eventually, the platform was forced to redesign its model to assume full MoR status and therefore absorbing greater compliance costs but unlocking commercial viability.

This case reflects a broader industry shift. As payment regulation tightens and risk appetites decline, suppliers increasingly insist on working only with clear, accountable MoRs.

Why MoR Status is a business and strategic decision

Being a Merchant of Record offers control, but also comes with:

  • Higher compliance burden: PCI DSS, PSD2 (in Europe), and local licensing may apply.

  • Operational responsibility: Refund handling, fraud detection, customer service.

  • Capital implications: Holding funds and managing chargebacks can affect working capital and banking relationships.

Conversely, not being MoR may seem operationally lighter, but comes with commercial limitations. Many platforms, particularly in B2B2C models, find themselves caught between the need for scale and the legal obligations that come with payment control. In sectors like luxury travel or high-value FIT bookings, being the MoR may be a prerequisite for doing business.

15. Appendix C – References

Merchant of Record and Legal Structure

Payment Structures, Pass-Through Risk, and Commission Models

Reconciliation, Risk, and Tax Implications

Payment Platform Documentation and Capabilities

Regulatory and Compliance Sources

Industry and Fee Insights

PSP FX Handling and Settlement Practices



Regulatory and Consumer Protection

Volatility and FX Market Context

Card Network and Bank-Level Fees

Booking, PSP, and System Integration

Regulatory and Audit Requirements



Real-Time Payments (RTP) Sector




Open Banking

Buy Now Pay Later (BNPL)

Crypto and Digital Currencies



Case Study 1 – Global OTA Transition to Merchant of Record

Case Study 2 – Luxury DMC Credit Collapse Exposure

Case Study 3 – Regional Hotel Group Adoption of BNPL



Conclusion & Strategic Recommendations

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