Technology has an obvious impact on travel payments, particularly in North America, Europe and China.
But have fintech and alternative forms of payment had an equal effect on the travel sector in Latin America?
The short answer is yes; in fact, the impact is significant.
Across Latin America, payment technology developments have the potential to revolutionize the travel market, which represents a substantial percentage of the region’s total GDP.
Fraud and security continue to be akey challenge to e-commerce and mobile commerce, especially across borders. And though it is changing, cash is still king in many parts of Latin America.
Howard Blankenship - CellPoint Mobile
In air travel alone, the Latin American market will grow 3.8% annually (according to IATA), and contribute $353 billion in GDP by 2037.
The Latin American e-commerce market is projected to grow to $80 billion this year (from $40 billion in 2016). These projections are related to the rise of the mobile channel in the region.
Nearly 40% of Latin Americans now book their travel on mobile devices.
More than 85 million new smartphones have been put in use in Latin America since 2016, and smartphone adoption rate is projected to exceed 71% by 2020, ahead of the global average of 66%.
Global AFPs such as PayPal, Apple Pay, Google Pay, Alipay and WeChatPay, may not be in every South and Central American country (yet), but they are becoming more widely available.
In other words, supporting and implementing leading digital payment methods is imperative for travel merchants to better serve their customers and meet evolving market needs.
But which payment methods? And what more do airlines and travel merchants need to know to adapt to a changing and dynamic marketplace?
Alternative forms of payment – from hyper-local to global
As our recent report on the market revealed, AFPs in this region aren’t limited to familiar global names like Apple Pay and Google Pay.
From Boletos in Brazil, Cabal in Argentina, and OXXO in Mexico, travel merchants must balance popular regional AFPs with global digital wallets to stay ahead of consumer expectations.
It is essential to match the preferred form of commerce to the specific markets. Supporting the AFPs that are popular in the specific regions a travel merchant operates in is crucial.
Mixing in support for the global mobile wallets that are gaining share also makes good sense, as does considering the payment methods customers coming from outside the region will be most familiar with.
Travelers from Asia are a big part of many Latin American travel merchants’ customer bases, so supporting WeChat Pay or Alipay is important.
The current state and foreseeable future is mobile
As evidenced by the growing percentage of Latin Americans booking travel on mobile devices, the mobile channel must also be central to any airline or travel merchant’s payment strategy.
Mobile booking and payments are not only the key to meeting traveler expectations, they’re instrumental to growing ancillary revenues and reducing drop-outs and abandoned carts.
Any friction in the mobile booking process will potentially result in loss of revenue.
Cross-border considerations and cash
Mobile payments and booking are often hampered in Latin American by difficulty with cross-border transactions.
Fewer consumers in Latin America (compared with North America or Europe) have credit cards, and those that do may have a domestic or regional card with currency restrictions or no support for cross-border payments.
Or they might reserve their credit card transactions for larger (non-travel) purchases.
Fraud and security continue to be akey challenge to e-commerce and mobile commerce, especially across borders. And though it is changing, cash is still king in many parts of Latin America.
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Travel merchant payment strategies must contend with these challenges, but AFP-focused approaches typically have the benefit of PCI-DSS compliance and other digital safeguards and address many of these concerns.
Travel merchants operating in Latin America need a clear enterprise strategy for payments, proficiency with local and regional payment methods, and direct connections to local acquirers.
With more Latin American travelers able to search, book, plan and pay for products and services directly from their mobile devices, meeting them in the mobile channel is crucial.
And they’re increasingly using alternative forms of payment,including installment payments, local card schemes, and global mobile and digital wallets.
How can travel merchants in the region better meet the needs and expectations of the travelers they serve?
They can start by adopting mobile and AFP-centric payment strategies and identifying a trusted payment services provider to implement them.