According to the press release, the solution eliminates the need for travel operators or other travel businesses that accept payments from consumers to offer cash collateral to their acquirer to offset the risk of non-delivery of services. Instead, consumer payments are held by a third party, and released immediately and in full to the travel business upon terms agreed by the company and Paysafe being met.
The safeguarding model has been created using Paysafe’s extensive experience in the travel industry to build a new risk management mechanism that benefits both travel companies and their acquirers. It has been developed in partnership with industry-specialised trust solution partners and uses Paysafe’s payment technology and sophisticated data management capabilities to immediately reconcile when funds should be released to the merchant.
Currently, holding cash reserves as collateral is industry standard, as acquirers manage the risk generated by consumers making high value transactions well in advance of delivery of the service. As the value of cash being withheld can often fluctuate, this has created numerous problems for travel businesses, including liquidity concerns and uncertainty.
Having identified the need for the industry to move away from traditional collateral-based risk management, Paysafe has been rolling out and battle testing its services with a limited number of partners in Europe. Following the COVID-19 crisis and the challenges that travel companies have faced during this period, the need for the travel industry to move away from payments relationships built on cash collateral and rolling reserves has grown, and the solution from Paysafe helps to support this shift.
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