Payments power travel companies to new destinations

For online travel agencies (OTAs), airlines, hotels and hospitality companies, the last three years have been a journey of discovery. The pandemic subjected the travel ecosystem to unprecedented levels of stress. Across the industry, COVID-19 exposed tensions, weak points and fault lines whose existence many people had never even suspected.

One of the main discoveries of this period has been that payments are not just an add-on. They are a foundational element of today’s travel and hospitality industry. Companies that are planning their future need a strategy to embed payments into almost everything they do.

From distribution channels for direct and indirect sales to relationships with suppliers and with acquirers, a coherent, effective and innovative payments strategy is a key driver for growth across the industry.

Travel and hospitality businesses need more than the right systems and processes for receiving and refunding payments in accordance with their policies. They need to manage complex flows of cash between customers, suppliers and acquirers. At every stage of the customer journey, they must try to provide their consumers with a consistent payment experience in all their markets and across all their channels.

As Web3 and the metaverse arrive, travel companies will need to upgrade their payment capabilities and procedures to handle emerging technologies and meet the expectations of their customers.

Payments are no longer the domain of treasury alone: the marketing, distribution and technology departments all need to be involved in developing payment solutions that deliver on a company’s strategic goals. Travel companies need to make sure they have the right people around the table to manage these challenges.

It took a global pandemic for many travel and hospitality companies to realize that without resilient and transparent payment processes their business might not be able to survive.

The legacy of that time lives on. Leveraging the latest advances in payments, travel companies are reaching new markets and reinventing the experience of their customers. This article explores a few examples.

Deferred delivery without the drama

Deferred delivery is at the heart of the business model for travel and hospitality. That makes relationships with acquirers critical. When a customer books a hotel or buys a plane ticket, the hotel or airline will often receive that money only when they check in or board. The delay between a booking, the delivery of the service and the receipt of cash creates risk. It is the job of the acquirer to mitigate that exposure.

Before the pandemic, nobody gave the matter much thought. The mass cancellations and chargebacks of 2020 to 2021 changed all that.

Travel companies whose policies committed them to return money to consumers suddenly found they did not have the cash from the acquirers to refund their customers. Without extra cash in their bank account for these contingencies, some businesses found themselves unable to fulfil their obligations.

Understandably, one of the industry’s priorities for the future is to improve acquirer relationships and make sure this cannot happen again.

Acquirers and Payment Service Providers (PSPs) such as Worldline engage with other acquirers to mitigate the risk of deferred delivery. In many cases, they underwrite the exposure. When acquirers have negotiated credit terms with their merchants, they will agree on when to release to merchants the money collected from consumers, so that the merchant can pay their suppliers.

Acquirers used to rely on industry averages to determine when to release the money to merchants. Now there is a better way. By pooling data about bookings and any changes to bookings in a neutral depository, acquirers gain more visibility into payment flows, lowering credit risk.

At Worldline, we are using an innovative data-led risk assessment tool that has been developed by Mastercard and fintech Actuary. This provides a real-time view of the status of a booking. Thanks to interactive dashboards, it is easy to determine when to release funds, especially in the event of changes to a booking made by a customer or by a supplier. All parties in the value chain see the same data and monitor changes as they happen.

Customers, suppliers and all parties in the ecosystem have a clear vision of where their money is and when it will be released. Supporting cash flow management and liquidity across the travel industry, it is an innovation that promises to remove much of the heartache from deferred delivery.

Enjoy data-driven insights

Data analytics also make it easier to optimize payments and generate valuable business intelligence. With data in one place, merchants and their payment partners can quickly extract information about payment errors or integration problems with acquirers.

Merchants can identify where there is room for improvement, for example in their authorization and approval rates. Using business intelligence dashboards developed by Worldline, travel companies can benchmark their performance against other companies in their vertical. That allows merchants to see if they are offering the right currencies and payment methods, if their authorization rates are comparable to their peers and if their performance in areas such as chargebacks and fighting frauds can be improved.

Reach new markets

Another way in which payment partners can help travel companies achieve their goals is by providing access to fast-growing international markets.

At Worldline, we empower merchants to provide the payment methods that their customers know and prefer. In countries like Brazil, Mexico and South Korea, online travel agencies can service customers with local payment methods without incurring all the costs of setting up a local presence.

Worldline supports over 150 online payment methods, including e-wallets and installments that in some markets are by far the most popular method of payment.

Delivered by the payments industry, the ability to offer a wide choice of currencies is fundamental to the customer payment experience of travel. Currency options largely determine the payment methods that a business can accept – if a business cannot offer renminbi it will not be able to offer Alipay to its Chinese guests.

While dynamic currency conversion (DCC) is a popular option for card-present transactions, at Worldline we suggest travel agencies and hoteliers use multi-currency pricing (MCP). MCP is better suited to the digital environment and allows the business to control the checkout experience.

Meet customer expectations

All OTAs and nearly all travel and hospitality companies aim to integrate the payment experience into the overall customer experience. The main challenge is to ensure a consistent experience across all distribution channels.

While many OTAs are very good at managing payment on their own website and app, when they hand control over to the supplier it becomes much harder to support their consumers.

The industry focus now is on integrating with suppliers, so that for example a Chinese customer who has pre-paid with Alipay on a booking site can then use Alipay for their incidentals at the hotel.

Payment partners have a key role to play in helping travel companies meet customer expectations. It is their job to orchestrate payments and make sure companies are offering the right payment choices. They must minimize errors and optimize authorization rates and acceptance costs for all payment methods, not only for cards.

The customer experience is too important to be a simple question of technology and processes. Supporting consumers and communicating with them along the customer journey is a strategic priority, especially for OTAs. With a high level of integration between the travel agency and the hotel or airline, consumers will be happy to use the same agency to book their next trip.

Welcome to Web3

A new and daunting challenge is looming for travel and hospitality companies, in the still-emerging shape of Web3. Covering technologies at various stages of development, including blockchain, cryptocurrencies, augmented reality and virtual reality (AR/VR), Web3 is much more than just another technology stack. It delivers an entirely new virtual experience for users and will reshape customer relationships.

For the travel industry, there are already some compelling use cases. In an industry where the user experience is so important, Web3 allows businesses to offer consumers an experience before their journey begins. As a result of the immersive experience, consumers can change their decisions on where to go and what to do when they get there.

Contrary to popular belief, there is no need for users to don goggles to enter the metaverse. Forward-thinking payments strategist can augment their customer experience to combine the physical with the digital, selling ancillary services or products all from a customer’s mobile phone. Equally as important, they could complete the purchase in any currency, including cryptocurrencies.

While Web3 is still in its early stages, suppliers who can deliver products and allow consumers to pay for goods and services in the metaverse will find themselves in a strong position for the future.

These technologies will transform the way consumer data is used, reduce the power demand and carbon intensity of online commerce, and transform the relationships between travel and hospitality companies and their customers for generations to come.

Boldly go

Whether you choose to be a Web3 early adopter or a follower, new payment technologies and services point the way to exciting opportunities across the industry.

To make this happen, the marketing, distribution and technology departments need to work together more closely on a payment strategy. These opportunities require reshaping relationships with acquirers and/or your payment service provider. If the right people participate in creating a payment strategy, a travel company can reinvent its customer experience, inclusive of the payment experience and position itself for a brighter future.