Read our report how despite the introduction of new payment options for travel agencies by the International Air Transportation Association, IATA, banks would still be able to use a loophole to charge travel agencies the 1% transfer fee for remittances for airline tickets to IATA.
Philipsburg — On the 18th of July, 2012, the Management of the Windward Island Bank NV (WIB) informed local travel agencies on St. Maarten that it received a notification from the Central Bank of Curacao and St. Maarten (CBCS) with the news that henceforth, all monies collected by the travel agencies for tickets sold on behalf of airlines and remitted through the Bank Settlement Plan (BPS), which was the revenue collections department of the International Air Transport Association (IATA), would be charged a transfer fee of one percent because the transaction would be considered as an international transaction despite the fact that the airlines at the Princess Juliana International Airport were exempted from paying the same one percent charge imposed by the CBCS. The monies remitted from the travel agencies were for these airlines, yet the travel agencies were now required to pay the 1% transfer fee themselves and would no longer be exempted.
Although, there was a outcry from local travel agencies at that time, in particular Travel Planners and Let’s Travel, nothing was done to avert the situation. Travel agencies expressed disappointment towards the new one percent rule because this would lead to inflation and that would not help the economy or the businesses that were striving to stay afloat.
At that time, the St. Maarten Minister of Finance was Mr. Roland Tuitt. Local travel agencies were forced to accept this new rule because there was no alternative to the IATA settlement system. They continued business as usual in silence until Tuesday, November 28th, when the court ruled in favor of Travel Planners in a case brought to court by this travel agency after WIB bank persisted in ignoring its requests to waive the 1% fee.
The Court of First Instance ruled that WIB would no longer be allowed to charge one percent for every transaction as previously done. They were also ordered to reimburse Travel Planners $216,074 US Dollars.
It is important to note that at the time of this decision by the central bank CBCS in 2012, IATA had only one settlement system which was the “one rule fits all” system. Today, they have “revamped their systems and introduced the New Generation of IATA’s Settlement System (NewGenISS) that could possibly avail the travel agencies an opportunity to avoid the one percent rule imposed by CBCS and explore other payment alternatives. However, in practice, this would only lead to the bank having a loophole to avoid the court order not to charge the one percent fee as the bank can still continue to charge the 1% fee on all other transfers and transactions.
Recently, the NewGenISS has been upgraded and now provides travel agencies with alternatives. According to IATA, the NewGenISS aims to “transform the current ISS business model which facilitates the distribution and settlement of funds between travel agents and airlines”. They have now provided three levels of agency accreditation plus introduced new ideas that will enable smooth transactions between travel agents and IATA.
These include the “three levels of travel agent accreditation, enabling agents to choose the one that best fits their business model, a Remittance Holding Capacity (RHC) that will ensure a safer selling process, Global Default Insurance (GDI) that will offer travel agents a flexible financial security option and help to reduce default losses for airlines”.
IATA has also introduced EasyPay, “a secure and cost-effective pay-as-you-go solution. IATA claims to also have improved transparency in the payment process. The new system also includes cheaper and easier measures to lower the costs for participants and simplify the processes involved, according to IATA.
With these alternatives and easier payment plans possible between the travel agencies and IATA, the question still remains whether the banking system would still impose the one percent rule enforced by CBCS on the travel agencies when paying for airline tickets, whether by remittances via BSP or via creditcards or direct deposits on IATA’s bank accounts.
Outside of this discussion, a removal of this one percent fee imposed by the CBCS in a post-hurricane economic environment in general will help the local businesses retain the much needed cash in their bank accounts, help to reduce inflation and stimulate economic recovery.
