Can a Virtual Credit Card Help Cut-Down on Travel Fraud?
When it comes to fraud, the travel sector doesn’t seem to get much press—at least compared to what we hear from retail or other verticals. Professionals in the industry, however, take fraud very seriously. According to recent study, more than two-thirds of travel managers said their organization has been affected by a payments-related data breach in the last year.
That helps explain why more and more travel managers are looking to virtual credit card (VCCs) as a promising solution. They recognize the need for new threat-management techniques, and VCCs may be the answer.
What is a Virtual Credit Card?
Also known as a virtual account number or a virtual card number, a virtual credit card is a temporary proxy card ID that serves as a stand-in for a permanent account number. VCCs are typically limited to a predetermined amount of transactions (usually just one), and are designed to automatically expire within days or hours of issuance.
It’s similar in many ways to the tokenization technology employed by EMV chip cards. Both use a temporary token in place of cardholder data. After a transaction, though, an EMV chip card still exists as a physical object. A VCC, on the other hand, ceases to exist entirely. Even if a fraudster manages to steal a cardholder’s VCC data, that data is useless once the card number expires.
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Why Accept a Virtual Credit Card?
VCCs could be among the most effective tools for fraud in the travel industry. They offer plenty of benefits for both travel managers and the travel companies they do business with.
First, VCCs save time. Travel managers can use virtual credit cards to procure travel reservations, including hotels, airfare and car rentals. Their most popular function here is in eliminating the manual process of the hotel direct billing process.
With a VCC, travel managers no longer need to fax individual forms to each hotel for each reservation. Automated processes allow for faster and easier reconciliation of travel expenses. This has the potential to shave countless tedious hours off bookkeeping and internal records processes—and saving time, of course, translates to saving money. Travel managers who utilize VCCs can save on overhead and reallocate staff for a more efficient, streamlined department.
Travel managers can save money in other ways, too. For example, VCCs allow managers to set spending controls. When virtual cards are deployed, limits can be set on transactions, restricting cards to only a certain MCC (merchant category code), transaction threshold, or velocity. Spending controls can help prevent abuse and loss due to employee fraud.
Speaking of fraud, both travel managers and travel merchants can use virtual credit cards to minimize their fraud risk. In the study mentioned above, 79% of travel manager respondents found single-use virtual cards helpful in anti-fraud efforts, describing them as either “effective” or “very effective.” Simply put, a physical card can wind up lost or stolen; a VCC doesn’t have those vulnerabilities.
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Many Advantages ... but ...
Cardholders taking proactive steps to minimize criminal fraud risk? Sounds like a merchant’s dream come true! And yet, despite the benefits of virtual credit cards, only one in five companies havie reportedly adopted them. If four out of five travel managers say they’re helpful…what’s the holdup?
The problem seems to be that most people just don’t really understand virtual card numbers. Potential users can’t see the benefits of using VCCs because they don’t know what they are or how they work. As AirPlus International President and CEO Diane Laschet explains:
“We have seen the need to educate around virtual card benefits not just to travel managers, but to corporate finance and procurement departments as well. This method of payment has the strongest level of security controls available on a payment tool, which is critical in the age of data breaches. When you couple that with the comprehensive data associated with each transaction, it is easy to see why this is the future of business travel payment. The benefits really touch all areas of the company from the back office to the traveler.”AirPlus International
Merchants, too, are an obstacle to wider adoption. To demonstrate, imagine a business traveler using a virtual card provided by her travel manager. The hotel needs the card to verify, and is not prepared to accept a VCC. Often, the travel manager ends up faxing a copy of the physical card to the hotel to conduct the transaction.
The scenario above presents multiple problems. Not only does it add a great deal of friction to the transaction process, but faxing and storing cardholder data is a non-PCI-compliant security risk. A physical copy of the customer’s credit card could easily be stolen and used by an employee, or even a third party who happens to get ahold of the paper.
Faxed card data that’s stored in a merchant’s system can be stolen, too. With data breaches such a common occurrence, storing a trove of cardholder data is like sitting on a time bomb. It’s also a potential violation of GDPR and CCPA data-management provisions which, if brought up, could result in hefty fines for the merchant.
Virtual credit cards can alleviate these problems. But, before they can really catch on, we need buy-in from multiple points in the process: travel and hospitality merchants, travel managers, and from the C-suite.
Looking to the Future of VCCs
The good news is that many of the major merchant service providers now offer virtual card terminals to accept virtual credit cards, both in brick-and-mortar locations and online. Plenty of merchants operating in the travel industry can benefit from the fraud protections offered by VCCs, simply by calling their processor.
Virtual credit card acceptance is a great tool to simplify customer interactions and provide long-term fraud reduction. Remember, though: no single fraud strategy is perfect. You need to employ a diverse range of tools and practices to minimize risk. Click below to learn more about how you can develop the right strategy for your needs.