AFTA’s new credit card solution

There's a major revolution brewing in credit card payments for travel in Australia, with billions of dollars in bookings through travel agents expected to shift away from traditional banks.

There’s a major revolution brewing in credit card payments for travel in Australia, with billions of dollars in bookings through travel agents expected to shift away from traditional banks to new merchant providers in what will become a very competitive and agent friendly environment in the future.

The change is being driven by the launch of the new AFTA Insolvency Chargeback Scheme (AICS). Under development for some time, AICS debuted late last month and will be fully operational before the next round of changes to credit card acceptance become mandatory on 1 September.

The scheme is the culmination of years of work by AFTA, prompted by the Reserve Bank review of credit card surcharging rules which kicked off with the release of an Issues Paper in March 2015. AFTA provided detailed submissions to the review which highlighted the unique features of the travel industry and the implications of third party supplier collapses for travel agents acting as the merchant. The outcome of the Reserve Bank deliberations included a provision suggested by AFTA which allows the cost associated with protecting the business against supplier chargeback to be included in the rate of surcharge when accepting card payments.

The new program puts to rest the key issue of chargebacks, which have left travel agents “caught in the middle” between consumers and collapsed suppliers, all the way back to the failure of Ansett in the early 2000s. ATAS travel agencies across the country will be able to access “solid industry owned protection against chargebacks” via the scheme, which will be a Mutual Beneficiary Fund operated similarly to an insurance product, but without the profit requirements and insurance policy complexities.

AFTA CEO Jayson Westbury said the launch of AICS means “we have finally found an appropriate vehicle to solve the missing link in the travel agency reform agenda”. He said the issue of chargebacks had frustrated and concerned travel agents, and that AICS would be levied as part of the eligible credit/debit card surcharge.

“Each time a supplier has collapsed the agent has been left holding the debt and the concern of covering the chargeback from the customer. Now AICS resolves this matter once and for all, and it will come at next to no cost to the travel agent,” he said. AFTA has confirmed that the new credit card rules, which require that only the costs of processing the cards be passed onto consumers, will also allow the cost of “forward delivery risk” (i.e. chargeback coverage) to be included in the overall permitted surcharge.

Owned by AFTA and operated as a separate Limited by Guarantee non-profit entity, AICS will be run under contract by Gow-Gates. To access the scheme travel agents will need to be ATAS accredited, but there will be very few other requirements. “As new and innovative merchant services become available to agents I am confident that not only will this scheme answer the questions on credit charge chargeback, they will also provide agents with better access to affordable and innovative merchant facilities for their businesses,” Westbury said.

AFTA has already ramped up its staff numbers in preparation for the launch of AICS, with long-time Cruise Lines International Association staffer and former travel agent Amanda Rixon joining as Partnership Executive. Dean Long, AFTA National Manager Strategy and Policy, will hold the key management responsibility within AFTA for the new scheme.

“I am really proud that AFTA has managed to negotiate a reform of the credit card surcharging arrangements that enables travel agents to resolve this long-standing problem,” Westbury added. AFTA members will shortly receive an information pack on the scheme, with the aim of making the transition to AICS and the new merchant service providers as simple and seamless as possible.

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