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
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.
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
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.
About the author...
Laurie Gablehouse is head of global travel solutions at Worldline.