At WiT Middle East, Checkout.com’s Remo Giovanni Abbondandolo (vice president of business development, MENA) presented a comprehensive report on the state of online payments in the Middle East travel industry.
During his exclusive presentation, Abbondandolo gave an in-depth view on the purchasing behaviors of travelers in the Middle East, where the opportunities lie and what some of the core challenges facing the industry are, as online payments begin to overtake traditional methods.
The Middle East is a powerful microcosm of how the travel online payments industry can develop, largely thanks to its very young, tech-savvy population (106 million between ages 15 and 29) who unsurprisingly, love to travel.
To set the context, Abbondandolo offered a snapshot into the habits of the Middle Eastern traveler.
One thing that came to the fore was the rising preference for shorter (less than 7 days) but more frequent trips throughout the region. Saudi Arabia stood out in particular, with 53% on travelers embarking on short trips, as compared to about a third in the UAE (34%) and the broader MENA region (37%).
When it comes to planning those trips, Abbondandolo emphasized that UAE and Saudi travelers are last-minute bookers. In fact, according to Cleartrip and Flyin, 67% of Saudi travelers book their travel plans via mobile device within the same week of travel, with 27% of those bookings happening within 48 hours of departure.
This may be due to the fact that international airfares to and from Saudi Arabia dropped by 9% in the past year, and the gradual rise of regional low-cost carriers – including Flydubai, Flyadeal and Flyna.
Not to mention, the rise of local (and localized) OTAs and metasearches, by the likes of Almosafer, Tajawal, Rehlat, Travelstart and Wego, have given customers access to instantly bookable flights and accommodation, shortening the path to purchase.
However, when it comes to making payments, Abbondandolo described the landscape as “highly regulated and fragmented.” He also remarked that the travel industry is seeing a slower adoption of online payment solutions as compared to other industries like e-commerce because of the typically higher transaction values associated with travel bookings.
As of Q4 in 2018, online payment approval rates stood at 5.13% in MENA, seeing an exponential increase from Q1 (0%) and Q2 (0.62%). According to the report, MENA now falls just behind the global online travel acceptance ratio by 3%.
“[MENA] is making great progress… but is still behind more mature markets,” said Abbondandolo.
Currently, online travel bookings are still dominated by traditional payment methods, namely Visa and Mastercard, which make up an incredible 95.25% of transactions. The remaining 4.75% are made up of AMEX, Paypal and others.
However, the landscape is shifting. Saudi Arabia recently allowed the use of debit cards for online transactions, paving the way for other countries within the region to follow suit. The kingdom introduced a debit card – Mada – in March last year, which saw a 39% adoption rate within its first three months (averaging out to 35.7% as of December).
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It is indicative of the high local appetite for online payments and the pressure on regional providers to give travellers the ability to transact in their preferred methods. Inevitably, this will vary on individual markets as dominant payments methods differ – for example: Mada (KSA), KNET (Kuwait), OmanNet (Oman) and Fawry (Egypt).
As with any growth, the rise of online payments comes with a fresh set of challenges for the travel industry.
Trust is a dominant issue for many first-time users, who are perhaps intimidated by the prospect of no longer communicating through a traditional travel agent. The report advised optimizing the check out page, offering multiple payment methods, ensuring easy-to-access customer support channels (and options for emergencies), as well as guaranteeing a seamless user experience.
On the provider’s side, Abbondandolo pointed at a fundamental lack of understanding behind the importance of imposing 3D security measures – an XML-based protocol that acts as an additional layer of security for online credit and debit card transactions.
He said that implementing the measures would not only shift liability off providers should things go wrong, but it would also help merchants assess different risk profiles and identify abnormal behaviors.
Ultimately, travel companies will need to adapt quickly as online payment methods become ubiquitous, particularly in a region with one of the highest mobile penetration rates in the world. The report concluded that the implementation of local payments has the potential to add USD 95 billion per year to the Middle East’s annual GDP by 2020.
* This article originally appeared on WebinTravel.
Spotlight: The Middle East Opportunity
Learn the key trends happening in a market of an incredibly young, social and mobile population at Phocuswright Europe May 15-16.