Imagine waiting months for your big family holiday, only to have to cancel at the last minute. Fortunately, no-fee cancellations are increasingly common when booking trips, even if asking for a refund still hurts.

However, late cancellations don’t just ruin family fun – in the B2B travel supply chain, they trigger a cascade of operational, financial and relational challenges. When trips are cancelled, payment reversals ripple through a network of suppliers, often leaving travel businesses stuck managing fragmented systems and anxious partners.

For OTAs, tour operators and DMCs operating under the merchant of record (MoR) model (and taking responsibility for the entire payment process), a cancellation isn't just an inconvenience; it's a financial exposure.

But embedded virtual card solutions, particularly when using single-use cards issued at the point of sale, can turn this pain point into a manageable, traceable process. With the right setup, virtual cards help you recover costs, reduce friction and protect supplier relationships.

In this blog, we'll be looking at:

1. Cancellations costing more than just revenue
   
   
2. Virtual cards built for modern travel operations
   
   
3. Rebooking, refunds, and cancellations
   
   
4. Managing supplier expectations and trust
   
   
5. Chargebacks: built-in protection when things go wrong
   
   
6. Virtual cards: reducing cost and complexity
   
   
7. A foundation for travel payments resilience

Cancellations are costing more than just revenue

The risk of no-fee travel cancellations is a growing concern among OTAs. According to Modulr’s research, 98% of travel businesses are worried about the impact of these customer cancellations on their financial planning.

The worry is more than hypothetical – cancellations mean costly lost revenue or refunds, and make themselves felt in delayed settlements, laborious manual payment reversals and missed reconciliation windows.

The problem is amplified in businesses where payment processes remain fragmented or reliant on traditional bank transfers. These setups simply weren’t built to handle real-time reversals or transaction-specific traceability. Used the right way, virtual cards can do just that.

Virtual cards built for modern travel operations

Virtual cards now account for 77% of total B2B value in card-based travel payments, according to Juniper Research. Their rise reflects more than convenience. Programmable cards bring real control and clarity to high-volume, high-velocity payment environments – a robust and reliable solution for B2B travel payments.

When deployed correctly, virtual cards offer:

• Single-use issuance linked directly to the booking event
• Predefined merchant category code (MCC) restrictions, to ensure use only at intended suppliers
• BIN routing for strategic control over card scheme preferences
• Card tokenisation to support secure tracking and matching
• API or middleware integration with OTA and TMC platforms, allowing full automation of card issuance, payment and settlement
• Booking reference-level reconciliation to eliminate manual cross-checking

These features aren’t just technical. They are operational safeguards that help travel companies respond to disruptions faster and with more confidence.

And in an industry where no-fee cancellations can be a decisive factor in getting a customer to commit to a booking, having a payment method that can handle a cancellation or a refund can take the stress out of such commitments.

Rebooking, refunds, and cancellations

Modulr virtual cards are unusual in that they are typically funded from safeguarded e-money accounts, with the virtual card only drawing on those funds when needed, and not before.

That means that bookings can be made with specific, traceable virtual cards, without committing to payment until it is needed – such as check-in, or check-out. And that means, in the case of a rebooking, that a simple change of date needn’t mean a change of payment from OTA to supplier.

But what if the money has already changed hands? Many suppliers need to be paid upfront, so let’s consider a typical scenario where a traveller cancels after the supplier has been paid.

This describes a B2B virtual debit card model, rather than a credit card that a typical consumer may use to book the holiday themselves:

A typical virtual card journey: Booking to refund

→ Booking made: Customer pays OTA.
→    Virtual card issued: Single-use debit card generated instantly, tied to booking ID and funded from its own virtual account.
→       Supplier paid: Card used by OTA to pay tour business, hotel or airline. Payment settles over card scheme with funds transferred completely.
→            Trip cancelled/disputed: Traveller cancels or disputes trip with OTA. OTA notifies supplier of cancellation, who raises it with card scheme.
→                [Chargeback protection: Where services are not fulfilled, chargeback claims may be initiated]
→                    Refund flow triggered: Scheme initiates refund, with exact funds passed to the respective clearing file it shares with the issuer.
→                         Automated reconciliation: Issuer returns funds to OTA’s virtual account or card, to be reconciled with the original transaction.

What’s interesting about virtual cards is that while a card may be considered closed after a single transaction, the card scheme and issuer are still able to receive a refund using the card details and deposit the exact funds into the funding account.

This model reduces the back-and-forth often needed to trace funds across intermediaries. Because the card was created for a single use, its audit trail is clean, with minimal scope for ambiguity or error.

Managing supplier expectations and trust

Payment cancellations also introduce reputational risks. When suppliers experience late or inconsistent payments, that erodes confidence in the OTA or DMC, even when the cancellation isn’t their fault. In an industry where timing and clarity are everything, slow refunds or lack of visibility can put commercial agreements at risk.

By issuing a unique virtual card per booking, travel businesses can limit exposure, provide clear reporting and reduce delays caused by batch bank transfer processes. Automation enables near-instant notification when a cancellation occurs, allowing suppliers to update room inventory or services quickly.

This level of transparency builds long-term trust, especially when working with partners across multiple currencies, jurisdictions or through intermediaries such as channel managers or wholesalers.

Chargebacks: built-in protection when things go wrong

Travel companies are often caught between customer expectations and supplier policies. Some cancellations fall outside no-fee windows, yet customers may still expect a refund. In such cases, virtual cards offer a second line of defence.

Thanks to the protections built into major card schemes such as Visa and Mastercard, virtual card transactions can support chargebacks where services were not rendered. For instance, if an airline fails to process a cancellation refund, the OTA can file a dispute and recover funds through the scheme. This is not an option with most bank transfers.

This gives OTAs a meaningful tool to enforce refund policies, even across borders. It also aligns well with evolving consumer rights and growing expectations around cancellation transparency.

Virtual cards reduce cost and complexity

Modulr’s travel research revealed that 44% of businesses lose more than 1.5 hours per person each week due to inefficient payment processing. This is time that could be spent servicing customers or improving product offerings.

With automation and a fully embedded virtual card solution, time wasted chasing refunds, correcting data entry or verifying payment status is dramatically reduced.

Real-time payment status updates, automated reconciliation via API and instant notifications bring visibility and efficiency to what was once a highly manual process. So, even if a refund or cancellation means lost revenue and remedial work, the impact of both on the business is minimised.

A foundation for travel payments resilience

While virtual cards streamline many processes, it’s important to ensure your key suppliers can accept them and that your internal systems are ready for integration.

While consumer-facing booking platforms have evolved rapidly, B2B payments remain inconsistent and error-prone. With heightened expectations around refund speed and fee transparency, now is the time to embed solutions that support both the customer and the supply side.

Virtual cards, when automated, traceable and fully integrated, offer just that.

The takeaway

Cancellations are inevitable. But revenue loss, operational friction and supplier conflict don’t have to be.

Virtual cards are more than just a payment tool. They are a strategic capability that reduces risk, improves control and unlocks confidence throughout the payment chain.

Modulr provides single-use virtual cards, issued in real time, with direct scheme access and robust API integration. Backed by our regulatory licences in the UK and Europe, we help OTAs, DMCs and TMCs protect revenue, improve settlement clarity and simplify reconciliation.

Looking to take cancellations from chaos into control?

Explore Modulr’s virtual card solutions for travel.