Speaking at the Hays Travel Independence Group (Hays IG) conference in the Algarve, managing director John Hays revealed the ban on credit and debit card surcharging under the new EU Payment Services Directive (PSD2), which came into force on January 13, is forecast to cost Hays IG members £1.3 million in revenue over the full year since the ban was introduced.
Hays said the aggregated cost to members of taking credit or debit card payments, per booking, was £8.06.
However, he said the effect of the ban was two-fold: firstly, it meant Hays IG members are no longer able to claw back this cost from clients, estimated to be worth around £700,000 revenue group wide.
Secondly, the ban coincided with a broader shift in consumer behaviour, reflected in the number of Hays IG clients paying by credit card, which costs more to administrate, rather than credit card.
Hays told delegates credit card payments had more than doubled over the past year from around 15% to approximately 31%, which is expected to cost Hays IG members a further £600,000 in costs.
“It’s a big change in consumer behaviour,” said Hays. “And we don’t see things improving. It’s a real double whammy.”
In response, direct debit was rolled out across Hays Travel on August 22 and has, according to Hays, already generated “very significant” cost and efficiency savings.
Hays IG clients can set up direct debits when placing a deposit, with the choice of paying the full balance 16 weeks prior to departure, or just six weeks out if paying monthly. Hays said across all direct debit bookings to date, monthly payment plans were averaging nine instalments.
While each direct debit payment carries a small administration cost to members, Hays said the net reduction in costs versus taking credit card payments was sizeable.
Hays is marketing direct debit “with caution” on bookings made closer to departure, but for bookings “further out”, Hays said direct debit was “absolutely brilliant”. “We knew it was something customers wanted,” he said.
Hays Travel retail director Jane Schumm added 66% of direct debit bookings had so far come from first time Hays Travel customers.