While the travel industry has been gradually recovering from the COVID-19 pandemic, new
payments trends have been quietly developing behind the scenes. The increasing
convergence of fintech and travel is undeniably one of the most significant and
interesting changes we’ve seen recently in travel tech.
Whether it is new payment
methods being offered by travel providers, advances in how money moves between
industry participants or travel companies offering fully fledged fintech
products, change is happening at a rapid pace. Here are our predictions for the
four trends shaping travel fintech next year.
Open banking creates new B2B payment options
One of the most significant changes happening in financial
services is open banking. In short, this change means that people can choose to
share their banking data with third-party firms offering value-added services. Open
banking also broadens the scope for the type of organization that can "interact" with a bank account. For example, payment initiation service providers (PISPs)
can initiate a transaction from a personal or business back account, without
the account owner needing to do so themselves.
It’s this change that will soon present new choices for
travel sellers paying out to providers like airlines. Today, sellers can payout
with industry settlement schemes, cards or virtual cards. Open banking
introduces a fourth major B2B payment method in travel, direct bank-to-bank
payments between seller and provider. Soon sellers will be able make use of
PISPs to pay from their bank account using the established banking rails, which
are both cost effective and trusted. So does this mean all B2B payout volumes
will shift to bank-to-bank in travel?
We do believe we will see some companies "go big" on
bank-to-bank. It’s particularly well suited to sellers and providers that do
significant business together, where the economies of scale are attractive and
trust is already established. The settlement is rapid and reliable. But it
isn’t appropriate for every payment.
However, we do feel any talk of "the death of cards" is
premature. That’s because the card schemes offer immediate scale and robust
default protection and dispute resolution services that are essential when
sellers and providers trade infrequently or haven’t established trust. Just
like consumer cards, B2B card providers also offer attractive commercial terms
for the payer in the form of rewards or rebate opportunities. These simply
don’t apply with a bank-to-bank transaction.
Travel companies offer fintech services
The most exciting shift we’re seeing is the ability for
travel companies to offer financial services to their customers. Co-branded
airline cards have been successful drivers of loyalty for many years but with
new embedded banking technologies the industry can begin to broaden the scope
of its financial services offering.
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Airlines, hotels and travel agencies are actually in a
strong position to move into this high-margin space because they can adapt
loyalty program to incentivize customers to use their financial services.
Imagine receiving points from an airline if you choose to have your salary paid
into its current account product.
Even a few years ago the complexity would have been too
great for most travel firms to consider this move. However, embedded finance
providers are able to offer "virtual" products that companies can easily
incorporate and (subject to any regulatory restrictions) white-label, without
having to become a regulated entity themselves.
For example, travelers can choose to freeze the price of a
flight or hotel booking, locking in the given price, for a fee. If the price
increases, the traveler still pays the locked price. If it falls, the traveler
pays the new lower price. Hopper’s fintech products see a 56% average
attachment rate for flight bookings, which increases to 70% when hotels are
included. Hopper customers buy 1.7 of its fintech ancillaries on average, which
translates to an additional $42 on top of the average flight spend of $355 –
very impressive results.
As we head into 2022 it’s increasingly clear that B2B
fintech in travel is about much more than simply paying out to suppliers. As
travel companies begin to recognize the opportunity to grow share of wallet and
deliver an improved experience, many will begin to resemble fintechs.
Buy now pay later in travel
"Buy now, pay later" (BNPL) is already a major payment method across retail.
By carrying out a rapid risk scoring of the customer a merchant (or its BNPL
provider) can decide to extend a line of credit, so the customer pays in
several installments. For travelers, BNPL is a very smooth experience that’s
quicker and easier than applying for a traditional loan.
But the concept really isn’t new. We’ve had credit cards and
lay away in shops since the 1960s, however BNPL is the modern version of
credit designed for the digital world. Enabling flexible payment by installments
is particularly important for the travel industry at the moment because it is mainly
family reunion that is driving travel demand and these trips often mean four or
more people traveling, which can be expensive.
For travel merchants the real opportunity is the product
upsell. If the traveler has flexible credit they can potentially afford to make
a higher value purchase, or to add more ancillary services.
According to our own research with 5,000 global travelers:
- 68% said BNPL would encourage them to spend more than usual
on summer travel
- 49% said they would be more likely to buy airline ancillary
services if BNPL was offered
With this type of upsell potential, we believe every travel
merchant will at least consider BNPL options in 2022. However, offering this type
of payment method isn’t without risk. Travel companies need to consider any
risk to their brand that could result from a BNPL partner offering credit aggressively
to travelers that are already highly indebted. At Amadeus we are consulting
with our customers to assist them with BNPL strategies that prioritize
When we think about how payments can truly add value for the
travel industry then it’s all about removing friction - making it easier for
the traveler to pay digitally, simply and quickly. That’s how we can improve
traveler satisfaction to drive loyalty whilst simplifying the payment
experience to drive more purchases across the entire trip.
At Amadeus we’ve done a lot of work to consider the entire
traveler journey from booking, to the airport and finally the destination, and
everywhere in-between. As an industry we need to create a great payment
experience not just when the traveler is on our website but also when they’re
Several paytech innovations have become available over
recent years that can be harnessed to remove friction.
- “Tokenization” enables merchants to encrypt and securely
store customer payment information in their own systems for future use.
- “Merchant Initiated Transactions” mean travelers only need
to authenticate once and subsequent payments can happen invisibly in the background
because the merchant can re-use payment information the traveler allows them to
- “Last mile digitization” uses techniques like QR codes or “pay
by link,” which are great ways to upgrade processes like chip and pin to e-commerce
payments, even in traveler-present environments like the hotel reception and
About the author...
Lacour is head of merchant services for payments and Damian Alonso is head of payer services at Amadeus.