Industry running scared of payment tech innovationNews / DistributionBy Marisa Garcia | July 26, 2018Share This article was originally published on A new study by PYMNTS and Amadeus shows that there is a nervousness in the industry around changing payment processing structures, despite an awareness that there could be material bottom-line benefits in doing so.Up to 5.4% of travel sales globally, or $74.5 billion, are hoovered up by payment service providers (PSP) fees, while four out of 10 travel companies struggle to manage multiple PSPs because of the associated costs. Sector differences Airlines pay the lowest fees, but these still represent 4.2% of revenue for an industry that operates on tight margins. At its Annual General Meeting this past June, IATA reported the airline industry has maintained a net profit margin of 4.1%.Hotel chains pay slightly more than airlines: 4.6% of revenue; but it is retail travel agents who pay the highest fees of all at 7.5% of revenue. Smaller operators, earning less than $15 million a year, pay higher fees. Too many cooks? PYMNTS finds that most travel companies work with anywhere between 3 and 10 PSPs with 42% working with 6 to 10 PSPs and 5% of companies working with 11 or more PSPs.At the same time, only 15% of travel companies have tried to adopt new payment innovations over the past three years with even fewer successfully implementing them.The US and Europe lag behind Asia Pacific in accepting new payment methods. In China, for example, there has been broad adoption of WeChat and Alipay. But consumer preferences, multichannel distribution and concerns over fraud have deterred many from simplifying their PSPs and moving away from the most expensive options.The primary drivers for travel companies to consider a move towards alternative payments are largely consumer-driven. PYMNTS finds that 91% are motivated to innovate based on customers’ suggestions and 83% are motivated by lost customers. Internal factors such as employee suggestions and operational stress carry less weight (69% and 63% respectively).And this is not an area where companies are willing to follow the leader or be first-to-launch a new concept. Just under half of companies will invest in new payment technologies because competitors do so. Costs vs revenue Perhaps also deterring companies is the cost of alternative payment methods. Only 36% believe that payment innovations would decrease their costs compared to current PSPs. However, as many as 96% of the travel companies studied by PYMNTS believe that the revenue gain from adopting alternative payments outweighs cost concerns; with larger companies anticipating the greatest gains from payment innovations.More than one-in-three companies earning between $500 million and $1 billion in annual revenue expected that payment innovation would reduce their costs, but only 7% of companies earning less than $15 million per year felt the same. OTAs the exception OTAs are more eager to adopt alternative payments than other travel companies, with 100% of those participating in the PYMNTS study saying that they plan to develop some new technologies over the next three years. Only 79% of other travel companies said the same.That difference might be attributed to previous experience. No OTAs had tried to develop new payment technologies over the past three years while 15% of other travel companies had.However, OTAs are experienced at handling a wider range of payment options than other travel companies—the average is six—and they are also experienced handling web-based payments. The primary motivations for OTAs to look at payment innovations are customer suggestions and the risk of customer loss.OTAs also prioritize employee feedback in this regard more than other travel companies; 80% said that employee suggestions are a reason to innovate, compared to 68% of other travel companies.OTAs would welcome third-party platforms for alternative payment processing citing increased security, and reduced time to market among the highest benefits of doing so, the report said.Click here to access the highlights and to register for the full report.