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Tuesday, 6 December 2011

Reducing Credit Risk

The eurozone debt crisis. Global recession. Bailout funds. Public sector strikes. Rarely has the economic outlook been so bleak.

Amid the backdrop of a challenging economic and geopolitical environment and the relapse into a second successive recession in as many years, businesses worldwide are becoming increasingly vulnerable to the dangers of credit risk.

Furthermore, with the festive period imminent and the accompanying lull in business, it is inevitable that numerous companies will experience short-term cash flow problems. As a result, payments to suppliers are delayed, who in turn suffer from credit exposure and take longer to pay their own bills. This creates a domino effect that cascades its way throughout supplier and customer networks.

The business travel sector is no different. In fact, credit risk becomes an even greater problem because of the fine margins to which many in the industry work. As recently as last week, Thomas Cook, one of the most iconic British brands in the travel sector, secured a £200m loan to enable it to survive the winter lull in business.

TMCs. OTAs. Hotels. Everyone is vulnerable to credit risk. For instance, hotels typically have to wait 30-60 days to receive payments in traditional billback agreements. Depending on their business model, payments to suppliers are then synchronised accordingly. However, a single default on payments in the supply chain affects everyone.

Therefore, in such challenging economic times, companies that become synonymous with prompt payments become increasingly attractive to do business with. This is where Conferma’s products, based on virtual card technology, offer many benefits for banks, corporates and the business travel community. With the Conferma Settlement Platform (CSP), TMCs can hold the credit on a virtual card account or, better still, have their corporate customers open a virtual card account, thus removing their own credit exposure. Conferma’s automated settlement and reconciliation solutions not only significantly reduce the risk of fraud, but also guarantee immediate payment to the supplier in order to remove any credit exposure.

For TMCs, assigning the credit risk to the corporate customer also opens up further opportunities for your business. Perhaps most importantly, if a client does experience problems, you will only be exposed to the loss of the transaction fee, as opposed to the full amount of the booking. However, you could also charge your transaction fee to the virtual card, ensuring that you receive payments quicker.

As an independent third-party settlement solution, Conferma represents the best option because it currently partners with some of the world’s largest banks. Furthermore, with an extensive network of content providers at our disposal, the Conferma Platform provides a single point of connection to the banking world and the travel community.

In the current economic climate, the Conferma Platform not only guarantees punctual payments to ensure customer satisfaction, but does so securely, efficiently and with reduced processing costs, allowing your business to weather the stormy winter period ahead.

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