Alternative Ticket Sales
Settlement Solution
©2015 MasterCard. Proprietary and Confidential.
What we have understood so far...
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Travel Agents (TA) settles majority of “cash” payments to airlines through BSP/ARC
BSP operates in 181 countries and territories. The system currently serves 400
participating airlines with an on-time settlement rate of 99.98%.
In 2015, IATA's BSP processed $230.3 billion.
The collection over BSP settlement is with an average assumed payment of 17 days
The 17 days average is an important cash flow for travel agents
IATA is about to introduce “Easy Pay” a settlement solution over card that drastically reduces DOP
(Days outstanding for Payments) for the Airline.
IATA reso 890 currently prohibits travel agents from paying airlines with cards issued in the TA’s
own name
TA’s have shown concerns about the Easy Pay solution
The ask to MasterCard;
“Can you find an alternative solution that is implementable in all markets and that results in a quicker settlement
and improve the cash flow for Travel Agents”
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©2015 MasterCard. Proprietary and Confidential.
Current Model
Assumed current Lufthansa DCC model:
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1.
Corporate/leisure client books an Airline
ticket via his Travel Agent.
2.
Travel agent makes a booking in the GDS
3.
GDS reports ticket sales to the Airline
4.
Ticket is issued
5.
The agent collects the total sum from
the client on invoice (70% of the cases)
and settles thru IATA BSP/ARC within 14
days from the booking
6.
Airline collects its ticket value from BSP
after an average of 14 days
BSP or ARC
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©2015 MasterCard. Proprietary and Confidential.
Proposed solution
Proposed model:
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2.
Travel agent makes a booking in the GDS and
uses credit card as FOP
3.
Airline provides the Acquirer and travel agent
a daily list of bookings per IATA location
4.
GDS reports ticket sales to the airline
5.
Acquirer send payment authorization to
Issuer
6.
Acquirer settles the ticket revenue (a fix
merchant fee to the airline within 2 days from
the booking payment processing)
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The issuer extends the credit term to the
agent to 21 days (14 days via BSP today)
Issuer collects the ticket revenue from the
Agent
VCN
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Bank/Issuer
Corporate/leisure client books an airline
ticket via his Travel Agent. The agent will
collect the amount over invoice
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PSP
Airline
Acquirer
©2015 MasterCard. Proprietary and Confidential.
Benefits for the Airline
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Airlines would no longer be dependent on an outdated BSP/ARC
solution. Solution that is implementable short term.
Receive Payments
Faster
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Airline would receive the payments in 2 days, rather then 14 days with
the current BSP model.
Control and Safety
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Airline would receive payment form a bank iso the Agent via BSP/ARC
All Markets
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©2016 MasterCard. Proprietary and Confidential
Benefits for Travel Agents
Extension of credit terms
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Travel Agents credit terms will increase from average17 days with BSP to 21 days with VCN’s
Improved Cash flow
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Travel Agent will be able to hold onto the ticket revenue longer.
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Travel Agent can decide to pre-pay the issuer in exchange for an increased rebate
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Travel Agent can reduce collateral provided to IATA
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Using a MC-branded product provides the TA chargeback protection against airline default
Prepaid Module to increase
rebate
Impact on IATA collateral
Protection against airline default
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©2016 MasterCard. Proprietary and Confidential
Desired next step
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Establish a working group that can work on defining
 the value proposition incl. business case
Initiate a dialogue with Travel Agent association
Initiate a dialogue with a number of airlines
Initiate discussion with Issuers
Create an Airline ticket revenue specific interchange
Pilot with a selected number of Travel Agents
©2016 MasterCard. Proprietary and Confidential