Sweden was the first country to accept bank notes back in
1661. Now, it’s the first nation to go cashless with laws passed in 2018
meaning it is no longer a legal requirement for businesses to accept cash.
In
fact, less than 1% of Sweden’s GDP is transacted in cash today and the plan is
to phase cash payments out entirely by 2023.
When it comes to digital travel, offering the traveler an
experience that’s faster, more personalized and more intuitive can be the
difference between success and failure.
Payments have always been integral to
that experience, but our latest data shows just how challenging it is to keep
up with changing traveler payment preferences.
Designed to help travel merchants refine their strategies, the
“Amadeus and PPRO Travel Payments Guide” recently analyzed traveler payment
preferences across the world’s 40 largest markets, highlighting a rapidly
shifting landscape.
According to the data, 2017 marked the year that alternative
payment methods (APMs) surpassed cards and cash combined for the first time - not
just in Asia but in Europe too.
Asia leads the way
Travel is arguably the world’s most global industry and that
makes it an inherently complex payments landscape.
With over 30% of a typical
airline’s bookings originating outside its home market and 17% outside its home
continent, you can quickly see why accepting the right payment methods across
locales is important. When it comes to alternative methods, Asia is the place to
start.
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Our analysis shows that 59% of the region’s e-commerce is
now paid for using alternative methods. E-wallets lead the pack, accounting for
49% of China’s $155 billion digital spend - making them by far the most popular
method and twice as popular as cards.
WeChat Pay and Alipay are most popular
with travelers, supporting mobile’s increasing dominance (56% of all e-commerce
is now conducted via mobile in China).
E-wallets are also popular in other Asian markets, such as
Hong Kong (30%) and Thailand (25%), albeit with far lower market share. But to
treat the region with a broad brush would be remiss.
Japan’s digital travel
spend stands at $32 billion, making it the world’s fourth largest market and
perhaps counter-intuitively, cards remain dominant with a 66% share of digital
payments. It’s also true that in some South Asian economies like the
Philippines and Vietnam people still rely on cash payments made in person.
Growth in western markets is the real story
What surprised us more than Asia’s leading role was the
relative pace of change in many western markets.
In the United States, $104 billion
was spent on digital travel, with cards shedding 4% share to alternative
methods over a 12-month period suggesting e-wallets may replace cards as the preferred
way to pay online by 2025 (at the current rate of change).
While cards remain
dominant with a 57% share, travel merchants would be wise to monitor the rapid
pace of change in how travelers are choosing to pay.
In Europe the pace of change appears quicker still. Major
markets such as France, Spain and Sweden all witnessed year-over-year growth in
APMs in excess of 7%. When the continent is taken as a whole, alternative
methods already account for around half of online spend.
Finding the right balance
There are now over 300 different payment methods across the
world. There’s been nothing short of an explosion of choice as competing
methods offer travelers convenience and loyalty benefits fueled by virtual
cards and corporate investment.
But it’s important to note this innovation does
not suggest it’s the end for cards.
In fact, most of the e-wallets in the world
still rely on the card networks in the background to handle their transactions.
For travel merchants the challenge is navigating this complexity to offer the
right mix of methods for your customer base, in the right markets.
At Amadeus we already process a significant volume of
payments for the industry (€100 Billion). We decided to formalize our
investments in travel payments back in 2012 given the rising cost and
complexity our customers were being forced to navigate.
Today, we are pleased
to have agreed our latest partnership with PPRO, a leading aggregator of
alternative payment methods, that makes it much easier for travel companies to
accept and experiment with new methods of payment.
Because when the environment
is moving so rapidly, it’s important to be able to swap a new method in and out
quickly and cheaply to assess its impact.
How will travelers choose to pay for services in
three years’ time? I’m not sure even travelers themselves would be able to
answer this question. For the travel industry, it’s important we take a
pragmatic stance remaining responsive to changing traveler needs.