Virtual Credit Cards in Travel: Accounting Risks and Opportunities

Virtual Credit Cards in Travel: Accounting Risks and Opportunities

Summary

Virtual credit cards are now widely used in travel payments, from OTAs issuing single-use cards for hotel bookings to agencies settling supplier invoices. While they solve some operational issues, they create new accounting challenges: FX mismatches, rejected payments at check-in, and breakage when cancellations occur. For travel agents and hotels, understanding how VCCs work is critical to protecting margins. This blog draws on Antravia’s research paper on VCCs to highlight the financial risks and opportunities.

Key Points

1. What are Virtual Credit Cards (VCC)

• Single-use, tokenized cards issued for a specific transaction.

• Common in OTA–hotel relationships and increasingly used by travel agencies.

• Advantages: security, fraud reduction, and payment automation.

2. Why VCCs Create Accounting Complications

• FX mismatches: card issued in one currency, used months later when rates have shifted.

• Rejections at check-in: hotels may not accept outdated or cancelled cards.

• Breakage: failed charges create reconciliation headaches for both sides.

3. Hotel Perspective

• Hotels face declined cards on arrival and additional admin to chase new payments.

• Refunds, no-shows, and modifications complicate VCC reconciliation.

• Rebate structures can incentivize agencies but reduce hotel margins.

4. Travel Agent Perspective

• Useful for controlling supplier payments and reducing fraud risk.

• Creates challenges when itineraries change, requiring new cards to be issued.

• Accounting systems must track which bookings each card relates to.

5. Reconciliation and Compliance

• Matching VCC payments to bookings is often manual and error-prone.

• Incorrect posting can distort revenue recognition and tax reporting.

• Strong systems are needed to handle cancellations, refunds, and re-issues.

6. FX and Hedging Issues

• Timing differences expose agencies to currency risk.

• Incorrect handling can lead to losses that erode commissions.

• Links with broader FX strategy, as outlined in Antravia’s white paper on FX.

7. Strategic Benefits if Managed Well

• Better fraud protection than traditional cards.

• Control over spending limits and usage windows.

• Possible rebates for larger agencies with direct issuer agreements.

8. Connection to Antravia Research

• Blog links to Antravia’s Virtual Credit Cards research paper for detailed analysis.

• The paper includes case studies and industry data that expand on the points here.

9. Final Takeaway

• VCCs are not a magic bullet.

• They improve security but create operational and accounting risks if unmanaged.

• Travel agents and hotels need systems and controls in place to avoid margin leakage.

My post content

My post content