Travel bookers seek different options to pay based on where they live and where they travel. But more often than not, however, they are frustrated because they have no choice. This is now changing faster than ever, driven by some important changes.
Open Banking, is a technology and regulatory standard that aims to return control of banking data to consumers to increase both transparency and control. It works in the EU and the UK. Other countries are in the process of introducing their own versions of this standard. Key benefits include the elimination of middlemen (significant savings), higher success rates and improved conversion at checkout.
Buy Now, Pay Later is a fast-growing trend that allows bookers to have a flexible, short-term financing plan – spreading the total cost of the booking over time, which is then collected by the BNPL provider. The biggest advantage for providers is that they receive the full amount at the time of booking. However, this has led to some challenges as consumers take on more financial risk. BNPL is increasingly regulated (UK) to ensure that customers are treated fairly. The US regulator is set to follow.
Demand for multiple payment options – Almost a quarter of UK consumers (22%) believe that the travel industry could offer better or improved payment services, such as the ability to pay a deposit or request a refund.
Changing consumer payment trends – A big shift from using bank cards to more modern payment methods such as Google Pay, Alipay and Apple Pay
Changes in fintech is enabling our industry to adapt and embrace these changes. New solutions that offer flexibility and speed are key to reducing payment problems and increasing customer loyalty. Online travel agencies were probably the quickest off the block given their travel tech background and the geographical diversity of their business model.
Hopper’s CEO Fred Lalonde said the company doubled its revenue during the pandemic thanks to fintech solutions. Indonesian company Traveloka has partnered with a Thai bank to offer a “buy now, pay later” service for people in Vietnam and Thailand. The company has also started integrating “pay later” credit cards in Indonesia.
Travel management companies have followed suit, although there are still large gaps between a separate travel management company (TMC), online booking tool (OBT) and expense management solution.
Fintech is driving a new generation of all-in-one tools that integrate travel booking, itinerary management, corporate cards and expense management into a unified solution. All-in-one solutions like TripActions have reshaped the entire T&E experience with unified travel and expense management tools that eliminate the need for traditional expense reports, automatically reconcile purchases and provide unprecedented control and visibility of spend.(Phocuswright)
Payments companies have also been a target for takeovers: Corporate accommodation platform HRS acquired PayPense in August. In the same month, Sabre announced the acquisition of Conferma Pay.
Despite the critical impact on conversion rates and the potential for cost savings, hotels have been slow to adapt, although there are some signs of an upswing. And this applies equally to hotel and distributor payments.
Milan-based innovative payments network Satispay became a unicorn in September 2022 after a €320 million Series D investment round. Satispay has developed a mobile payment network that works as an alternative to credit and debit cards. Launched in 2015, the Satispay app allows users to pay at physical and online shops, exchange money between friends and benefit from a range of other services, including phone top-ups, bill payments, car tax stamps, donations, gift envelopes and savings.
Fintech efforts are also addressing the digital identity challenge – the digital wallet and the digital ID. In June 2021, the European Commission set out to tackle this problem head-on. It proposed to give every EU citizen a set of strong digital identity credentials that will be recognised everywhere in the zone. These IDs will be accessible through a digital wallet and anyone can use them from their mobile device.
Why is this relevant to payments? Providers, like Worldline, are currently taking steps to integrate their systems with this new digital wallet to create a more seamless customer experience when booking, guaranteeing and paying for travel products and services. This would also save time and money and improve the customer experience when booking a hotel or a flight when the digital ID is already verified and officially approved.
Central Bank Digital Currencies (CBDC)s & Non-Fungible Tokens (NFTs): CBDCs are digital replications of existing monetary cash value and will be an area to consider for the industry as it looks to advance digital payments capabilities. When combined with a customer’s digital ID, CBDCs could dramatically prevent fraud or loss of funds amidst an accelerating shift towards cryptocurrency assets.