How to turn travel supplier payments into a revenue stream
Most travel intermediaries, including travel management companies, think about supplier payments as a cost to manage. A line on the cost side of the ledger. Something to keep as low as possible through negotiation, consolidation, or efficiency.
That framing is costing them money. Travel intermediaries that pay hotel and airline suppliers using virtual cards generate interchange income on every transaction they process. The revenue is already there in the payment flow: the question is whether the business is set up to capture it. The question is also whether the business is working with the right provider to do so. Rebate rates matter, but they are only one part of the picture. The provider that pays the highest rebate is not automatically the right partner, and treating the decision as a simple price comparison can leave money, service quality, and product capability on the table.
Supplier payments as a cost centre, and why that framing is costing you money
The cost-centre framing for supplier payments is understandable. Paying hotels and airlines is an operational necessity, and the traditional mechanisms (bank transfers, manual card payments, cheques) generate no return. The cost is the cost.
Virtual card settlement changes that equation. When the payment mechanism generates income, the question is no longer how to minimise the cost of paying suppliers. It becomes how to maximise the value of the payment flow you are already running. That is a different problem with a different answer.
The shift in framing matters because it changes where attention and resource go. Businesses that understand supplier payments as a revenue opportunity invest in supplier coverage, programme management, and payment infrastructure. Businesses that treat them as a cost tend to under-invest and under-earn.
How interchange income works in travel supplier payments
The mechanics of virtual card settlement
When a travel intermediary pays a hotel or airline using a virtual card, the transaction flows through the card network in the same way any card payment does. The supplier charges the card, the acquiring bank processes the transaction, and an interchange fee is paid from the acquiring bank back through the network to the card issuer.
The issuer shares a portion of that interchange income with the intermediary running the virtual card programme. The exact sharing arrangement depends on the programme structure agreed with the issuer, but the principle is consistent: more virtual card transactions mean more interchange income.
Each virtual card is typically single-use, scoped to a specific booking, and configured with spending controls that match the transaction amount. This is what distinguishes virtual card supplier payment from a physical corporate card: the control and the data richness that comes with each transaction.
How rates are structured and what affects them
Interchange rates in virtual card programmes are not fixed. They are influenced by the card configuration, the supplier category, transaction volume, and the specific agreement between the intermediary and the issuer. Higher-volume programmes typically negotiate more favourable structures. The supplier mix matters too: different merchant category codes carry different interchange rates.
What this means in practice is that the income potential of a virtual card programme is not determined at the point of signing. It is determined by how the programme is managed over time, specifically by what proportion of the supplier base is actually being paid by virtual card and how the programme is configured around that supplier mix.
Why most intermediaries are not capturing their full potential
The gap between the interchange income a travel intermediary could earn and what it actually earns is usually explained by one thing: supplier coverage. Coverage is the proportion of the supplier base that is being paid by virtual card. For most programmes, that proportion is lower than it could be.
The reasons vary. Some suppliers have never been set up for virtual card acceptance. Some are being paid by bank transfer out of operational habit, not because bank transfer is the right method for those transactions. Some intermediaries are not aware that coverage is the primary lever for growing interchange income, so they do not actively manage it.
Low coverage means the programme is leaving interchange income uncaptured on every transaction that goes out by bank transfer instead of virtual card. At scale, that interchange income gap compounds. A business processing 5,000 supplier payments per month where half go by bank transfer is earning at most half its interchange potential.
Turning supplier payments into a consistent revenue stream
Making supplier payments into a consistent revenue stream requires three things: a virtual card programme with the right structure, active management of supplier coverage, and a provider that works with you to grow that coverage over time.
Programme structure matters because the configuration of the virtual card (spending limits, merchant restrictions, data fields) determines both the quality of the reconciliation data you receive and the interchange rate applicable to each transaction. Getting this right at the programme level has a compounding effect on every subsequent transaction.
Supplier coverage is the variable most directly under the intermediary's control. Identifying which suppliers are worth prioritising for virtual card adoption, understanding which ones have reservations about accepting cards, and working through those reservations is an ongoing commercial task, not a one-off setup step.
The provider relationship determines how much support you get on both fronts. Some issuers hand you the cards and leave you to build the programme yourself. Others work actively with you to identify coverage opportunities and engage directly with suppliers on your behalf to explain the value of accepting virtual cards. That difference in approach translates directly into programme income over time.
It is also where the headline rebate rate can become misleading. The provider offering the most generous rate is not automatically the best choice. A higher rebate on a programme with limited supplier coverage, patchy service, or a product that has not evolved in years will earn less, and cost more in operational drag, than a slightly lower rebate on a well-supported, actively developed programme. The questions worth asking are about the depth of the product, the quality of day-to-day support, and the provider's track record of iterating and improving. Not just the percentage on the front page of the proposal. For a full breakdown of what to look for, see our guide to how to choose a virtual card issuer.
Treated this way, the supplier payment function is no longer just an operational cost. It is a commercial lever, one that rewards attention and investment in the supplier relationship. A provider whose product, service, and commercial model are built to grow the programme alongside you, not just one offering the highest headline rate.
Explore the benefits of Modulr Virtual Cards for travel supplier payments.
This article is for informational purposes only and should not be construed as financial, legal, or regulatory advice.
TL;DR
Travel intermediaries that pay suppliers with virtual cards generate interchange income on every transaction. Most are not capturing their full potential because supplier coverage (the proportion of the supplier base paid by virtual card) is lower than it could be. Coverage is determined by how actively the programme is managed, and by the provider supporting it. The headline rebate rate is only one input, not the whole picture.
FAQs
How do travel intermediaries earn interchange income from supplier payments?
When an intermediary pays a hotel or airline by virtual card, the supplier's acquiring bank pays an interchange fee to the card issuer. The issuer shares a portion of that fee with the intermediary. More virtual card payments mean more interchange income.
What interchange rate can travel intermediaries expect from virtual card supplier payments?
Interchange rates vary based on card configuration, supplier mix, and agreement with the issuer. Rates can range between 0.5% and 2% of transaction value, though the exact figure depends on the specific programme structure.
Why are many travel intermediaries not earning their full interchange potential?
Low supplier coverage. The proportion of the supplier base actually paid by virtual card is usually smaller than it could be. Some suppliers default to bank transfer out of habit, some have never been set up for card acceptance, and some intermediaries do not realise coverage is the primary lever.
Is interchange income reliable enough to treat as a revenue stream?
Yes, for intermediaries with sufficient payment volume and consistent supplier coverage. Income scales directly with how many transactions settle by virtual card. Programmes that actively manage coverage generate more predictable income than those treating virtual cards as a default for whichever suppliers happen to accept them.
Should travel intermediaries just choose the provider offering the highest rebate rate?
Not necessarily. The headline rebate is one input into programme income, not the whole picture. Supplier coverage, day-to-day service quality, product depth, and the provider's willingness to keep developing it all affect total earnings. A slightly lower rebate from a provider with strong coverage support and an actively developed product will typically outperform a higher headline rate from a provider that leaves you to run the programme alone.
Does using virtual cards for supplier payments cost more than bank transfer?
Virtual card programmes have fee structures that vary by provider and design. Once interchange income and operational benefits (automated reconciliation, spending controls, data richness) are factored in, the net cost is often lower than the gross fee suggests. Compare total cost of ownership, not headline transaction fees alone.
