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Canadian travel agencies are #4 in the world for debit memos, but help is on...

Canadian travel agencies are #4 in the world for debit memos, but help is on the way

Thursday, April 5, 2018

This story originally ran in the March 29, 2018 issue of Travelweek magazine. To get Travelweek delivered to your agency for free, subscribe here.

TORONTO — Debit memos have long been a major headache for travel agents especially in Canada and now Canadian travel agencies have the dubious honour of one of the highest instances of agency debit memos (ADMs) in the world.

After lobbying from ACTA and with help from IATA and ACCELYA a new automated technological solution aimed at reducing the number of ADMs agents have to deal with is in the works, with an expected roll-out in September 2018.

A big part of the problem in Canada is the manual process for calculating and entering commissions in the Billing & Settlement Plan (BSP). In most other countries, these calculations are automatically generated. In Canada, the calculations are manually entered.

At last count, in terms of debit memo volumes Canada ranked 4th highest in the world, behind India, China and Saudi Arabia. Globally, the ratio of ADMs to total transactions issued is 1:2,900. The rate is a bit higher in countries including Australia (1:1,587) and Italy (1:1,947). In Canada, it’s 1:477.

And it’s not just the ADM amount itself, but also the administrative costs that are ramping up frustrations for Canadian agents, says ACTA’s Heather Craig-Peddie, Vice President, Advocacy and Member Relations. ACTA is part of IATA’s Agent Debit Memo Working Group (ADMWG) and the Agency Programme Joint Council (APJC).

“In some cases, the administration penalty added onto the debit memo is higher than the amount of the debit memo,” says Craig-Peddie.

A 2017 IATA report pegs the average ADM admin cost for travel agencies at US$46. IATA’s analysis also shows that almost half of ADMs in recent years were for a transaction value of less than US$30.

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The most common reasons for Canadian travel agents to get hit with a debit memo are related to commissions and chargebacks. Just back from an IATA meeting in Montreal, Craig-Peddie says BSP Canada is a market where historically no airlines are applying BSP Commission Control setups, resulting in commission being the largest category in terms of ADM volume in BSP Canada. Eyeing other countries where commission is calculated automatically, ACTA’s lobbying efforts have been aimed at IATA to implement a similar set up in Canada.

While Canada punches above its weight when it comes to ADMs, BSP Canada is the 7th largest BSP on a global level. Considering the volume, it’s not surprising Canada has a higher number of ADMs, says Craig-Peddie. The high reliance on credit cards in this market contributes to the higher possibility of credit card chargebacks and leads to even more ADMs. Worldwide Canada is the third biggest contributor to the Chargeback category [for ADMs] in monetary terms, after Argentina and Brazil.

The manual calculations are a major factor when it comes to skyrocketing rates of ADMs, although IATA estimates that only 18% of global ADMs are related to manual fare calculations. IATA also estimates that in over half of the global BSPs, there are 2,500+ setups that are more than 20 years old, making for antiquated technology and paving the way for more mistakes and more debit memos.

Recently IATA and ACCELYA signed an agreement to market the web-based platform Net Remit 5 in Canada, with some adjustments in the IATA Billing Settlement Plan Software (IBSPS), says Craig-Peddie. She adds that the adjustments should be completed by September the latest.

The new tech solution will automate the commission control setup, as in other BSP jurisdictions. ACTA says the Net Remit 5 program is just one automation tool that IATA is working on and each tool is expected to have a positive impact for travel agencies.

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ACTA anticipates a positive reaction from the retail travel trade. “Considering the frustration expressed by [ACTA’s] agency members when dealing with debit memos, they will be relieved with the implementation of corrective measures to the commission control set-up,” says Craig-Peddie.

She adds that ACTA is happy that IATA recognizes the seriousness of the situation “and are working on correcting the problem as quickly as possible”.

Once the new process is up and running, travel agencies will have a fellow retailer to thank: President of Maritime Travel and ACTA Member Gary Gaudry. ACTA is thanking Gaudry for working with the organization “to find potential solutions that will have a positive outcome for travel agencies across Canada.”

This story originally ran in the March 29, 2018 issue of Travelweek magazine. To get Travelweek delivered to your agency for free, subscribe here.

Kathryn Folliott

Kathryn Folliott

Editor at Travelweek
Kathryn is Editor at Travelweek and has worked for the company since 1995. She has travelled to more than 50 countries and counts Hong Kong, Jerusalem, the Swiss Alps and the Galapagos Islands among her favourite destinations.
Kathryn Folliott
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