Beyond the mismatch: The real challenge behind payment reconciliation in travel

When I was learning to drive a manual transmission, I struggled with the clutch. No matter how many times someone told me "just ease off the clutch while pressing the gas," the car would stall.

What changed everything for me was understanding what was actually happening beneath my feet.

I opened one of my Dad’s car maintenance books and learned about the flywheel, the pressure plate, and the mechanics of how the clutch pedal actually decouples and re-engages the engine with the transmission. Once I understood the system, operating it became intuitive.

This might seem like an odd way to begin an article about payment reconciliation, but it speaks to something fundamental about how we approach problems at Payrails. 

It's easy to fall into what sales professionals call "the solution trap": knowing what your product does and looking for people who need it. But the more valuable approach is to step back and ask, “What is the actual problem we're trying to solve?” 

This mindset transforms us from solution sellers into problem solvers. And when you truly understand a problem, you can build something that addresses not just the symptoms, but the underlying causes.

The problem with manual payment reconciliation

Ask most people what payment reconciliation is about, and they'll tell you it's about matching payments with orders. Column A needs to match Column B. The ERP says you sold something, the payment provider says you received payment. Then, make sure the numbers align.

While that’s not wrong, it misses something crucial.

The real problem isn't the mismatch itself (mismatches are inevitable in any complex payment system). The real problem is status ambiguity.

What does status ambiguity look like in practice? Here's an example of a workflow that will sound painfully familiar to anyone who has ever dealt with the operational headache of manually reconciling payments:

• A payment flows through its lifecycle, touching multiple systems along the way 
• The ERP records the sale when an order is placed 
• The PSP records it when the payment is captured 
• Your internal dashboard pulls from another database 
• Someone has an Excel sheet with yesterday's data 

Very quickly, the authoritative status of a single transaction becomes unclear.

Your ERP says "captured." Your PSP says "partially refunded." Your Excel sheet says "authorized." Which one is right? Where is the money actually?

This ambiguity creates a world of cascading problems for businesses in growth mode: accounting headaches, operational chaos, and increased fraud risk. 

The Payrails approach isn't just to match amounts. It's to validate the lifecycle status of every transaction in real-time and become the single source of truth. Our goal is to tell you which status is the right one at any given time.

From month-end panic to continuous control

Talk to anyone in financial operations, and they'll tell you about the end-of-month scramble. Accountants have perhaps a week to reconcile 30 days of data. It's a pressure cooker environment where the primary goal becomes "make the books balance" rather than "understand what actually happened."

And here's a nuance that matters: in an imperfect world, some ambiguity will always exist. The goal is lessen the time and operational burden involved in resolving those inconsistencies.

When reconciliation happens daily rather than monthly, the month-end close becomes a non-event. Ninety-five percent of the work was done yesterday. Finance teams stop acting like data entry clerks scrambling to force-balance accounts and start acting like financial analysts with clear visibility into their business.

Payment reconciliation: Where a handful of transactions take most of the effort

Most businesses have figured out the "happy path." Internal scripts or basic reconciliation tools can match the straightforward 95% of transactions: the clean ones where a payment was made, captured, and settled without complications.

But then there's the remaining few.

This is where the real work lives: filled with partial refunds, chargeback reversals, cross-border tax adjustments, currency fluctuations between authorization and capture, failed retries that succeeded on the second attempt, or promotional credits that offset payment amounts. Sounds familiar?

These edge cases are the reason accountants are still manually reviewing spreadsheets and tracking down discrepancies weeks after transactions occurred.

Payrails specializes in this messy middle. Our rules engine captures the cases that usually break internal scripts. We reconcile 95% of transactions continuously, automate the last mile, surface the most complicated cases for human review, and give teams the ability to configure how they handle them.

The result: using ID-based matching, nearly all of reconciliation is automatic and continuous. Rule-based automation handles most of the remaining cases, learning and continuously improving. In addition to saving untold hours of manual work, finance teams can focus their expertise on the remaining situations that truly require their nuanced judgment.

The travel industry: Where reconciliation complexity multiplies

Payment reconciliation challenges become particularly acute in travel. The travel industry operates on two primary commercial models, each with its own reconciliation nightmares.

The agency model: The ghost commission problem

In the agency model, an OTA creates traffic and directs customers to a hotel, the guest pays the hotel directly, and the hotel then owes the OTA a commission.

The risk here is ghost commissions.

If a guest books through an OTA, then cancels directly with the hotel, there’s a good chance the hotel forgets to update the OTA's system. At the end of the billing period, the OTA invoices the hotel for commission on that booking. The hotel, faced with thousands of line items, struggles to identify which charges are legitimate and which reflect bookings that were actually cancelled.

Because of this, money leaks out of the system, and hotels end up paying commissions on bookings that never generated revenue.

The merchant of record model: FX drift and VCC breakage

In the merchant of record model (think Booking.com), the OTA collects payment from the guest and then settles with the hotel later, often via virtual credit cards with specific amounts and sometimes in hard-coded currencies.

Two problems often emerge:

• FX Drift: The currency fluctuates between when a booking is made and when the actual charge occurs at check-in. The hotel tries to charge the VCC and comes up €5 short because of exchange rate movement. Now someone needs to investigate a discrepancy that costs more to resolve than the amount in question.
• VCC Breakage: Hotels try to charge for incidentals or charge in a different currency than the card was issued in, and the payment fails. This requires manual intervention, creates delays in the hotel receiving funds, and generates reconciliation headaches.

The double-loop dilemma

Travel businesses face another challenge that compounds reconciliation complexity: the double-loop problem.

• Loop 1 is the pay-in from the guest: high volume, requiring fraud checks, often involving BNPL or other complex payment methods.
• Loop 2 is the payout to suppliers: hotels, airlines, and car rental companies. These payouts happen later, often via bank transfer or virtual credit cards.

In between these two loops, critical data gets lost, like booking IDs, promotional towards or loyalty credits.

To solve this problem, Payrails sits in the middle as a ledger: holding the "golden record" that links the pay-in from the traveler to the pay-out to the supplier. We ensure you can trace a $10 payout back to the specific passenger who funded it, maintaining data integrity across both loops.

Reconciliation: Solution selling vs. problem solving

I started this article with a story about learning to drive because it illustrates something we believe deeply at Payrails: the solution makes sense only when you understand the mechanism underneath.

We're not in the business of pitching features. We're in the business of understanding how money actually moves through your systems, where ambiguity creeps in, what causes operational chaos, and how your specific business model creates unique reconciliation challenges.

Sometimes that means building reconciliation capabilities. Sometimes it means sitting as a ledger between payment loops. Sometimes it means rule engines that handle edge cases. The right solution depends on the actual problem.

And the actual problem is rarely just "Column A doesn't match Column B." 

When we engage with merchants, particularly in complex industries like travel, we invest time understanding your operations and how the treasury team thinks about unallocated cash.

This isn't just good sales practice. It's how you build products that solve real problems rather than theoretical ones.

Interested in understanding how payment reconciliation actually works in your business? We'd be happy to walk through your specific challenges.