has continued to recover this year, with IATA’s data showing airline industry
revenues are expected to be 43%
higher than 2021. Our own analysis also suggests resilient demand,
concluding that consumers were prepared to protect spend on travel ahead of
other discretionary areas, like home improvement or fashion.
we kick off 2023, how might the travel industry benefit from advances in
fintech? And conversely, where can the fintech sector find new growth
opportunities in the travel industry?
you remember when opening a bank account meant walking into a high street
branch or when only a small number of banks offered financial services? The
world has moved on, with the maturing of digital-first challenger banks and the
widespread availability of fintech services.
Embedded finance is the natural
continuation of this trend, where financial services like payments, lending and
current accounts become embedded in our everyday digital experiences. According to
Bain, more than
5% of all financial services transactions in the U.S. can already be classed as
“embedded finance” and these transactions will be worth over $7 trillion by
high levels of trust and existing loyalty schemes, the travel industry is a
natural contender to embrace embedded finance. Will airlines become banks? It
really depends on how you define a bank.
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While we don’t expect travel
companies to seek regulatory approval to begin offering lending services, we do
expect them to partner with wholesale providers of such products. We also think
it is increasingly likely that travelers will be able to purchase and use
current accounts, payments services and loans without leaving the travel
company’s app or website. Rather than travel companies reselling fintech
services and passing travelers on to the service provider, the industry is
likely to natively embed these services.
are already great examples of embedded finance business models. Take Shopify,
which provides a full suite of software-as-a-service so companies can quickly
launch an online shop. Over half of
actually come from payments and loan products provided to e-commerce sellers,
which it embeds in its products.
has been a year of macroeconomic adjustment. Currencies have fluctuated across
the world and there is good reason to believe currency volatility will continue
think finding novel ways to manage this volatility, or at least to ensure
travel companies and their customers are protected, will be a significant focus
On the B2B side, technology can play a role by helping travel
businesses to hold a number of different currencies so they can settle with
partners without incurring foreign exchange (FX) losses. Similarly, we expect
greater demand from travelers for services to be priced in their native
currency, and this will present opportunities for travel merchants to improve
their customer experience and benefit from FX spreads.
payments smoothly and securely has been a key focus, with Strong Customer
Authentication (SCA) requirements advancing the role of biometric authentication
as a "second factor" when proving your identity. It’s already possible to pay
for goods and services online using biometric authentication options in
services like Apple Pay or Google Pay, but we think the travel industry can go a
are catching on fast for travel use cases. For example, Amadeus is currently
working with British Airways to trial biometrics at Heathrow Terminal 5 on
selected flights. Passengers that choose to enroll will no longer need to
provide their boarding pass or passport at check-in, bag drop or when boarding
the aircraft. Instead, facial recognition is used to validate the passenger’s
identity as they approach each service point. Similarly, hotel chains are
experimenting with biometrics for self-serve check-in.
not a great leap to imagine that these travel identity checks could be re-used
to authenticate any payments the traveler might make during their journey, for
example, when pre-ordering meals or upgrading a seat. For travelers choosing
biometrics, making an in-person payment could soon happen invisibly in the
Bank Digital Currencies (CBDCs) are natively digital forms of currency,
typically pegged to the country's fiat currency and issued by the Central Bank,
that no longer operates using the traditional banking or card network rails.
Instead, they’re enabled using blockchain technology that allows for fast and
secure exchange of value across the web.
Several authorities across the world
are exploring the potential for CBDCs, including the European Central Bank and
the Bank of England. Research from
the Bank for International Settlements
forecasts that central banks covering 20% of the world’s population are likely
to launch CBDCs in the next three years.
stablecoins are privately issued digital currencies backed 1:1 against a fiat,
usually a government-issued currency like the U.S. dollar or the Euro,
maintaining a stable price with the underlying currency. They also use
how CBDCs issued by central banks or stablecoins might improve global payments
remains to be seen, but it’s worth keeping an eye on how they evolve.
At a basic
level, we can expect money that is natively digital by design to present
opportunities for faster and cheaper payment services. This could be
particularly interesting for cross-border payments or industry settlement
schemes in travel. If these forms of money gain widespread adoption, then it’s
conceivable travelers might soon be paying for travel using these alternative
digital currencies, with opportunities for cost effective global payments.
has shown the important role that payments and fintech innovation is having
across the travel industry. Our own
suggests that investment in this area is a high priority for the majority of
travel companies, with fintech being adopted by OTAs, airlines and corporate
We expect adoption to accelerate further in 2023, driven by an
increasing number of partnerships in travel and fintech with continued
recognition that smooth and connected payments can be an important
differentiator for travel brands.
About the author...
David Doctor is executive vice president of payments at Amadeus and CEO of Outpayce
, the company's new payments business.