How Payments Can Support the Travel Industry

  • John Harris, SVP Travel & eCommerce at emerchantpay

  • 31.05.2024 03:15 pm
  • #Payments #TravelIndustry #Support

In recent years, there has been a clear shift in the way payments are perceived in the travel industry. Previously, payments have been an afterthought, acting simply as the final step in the buying journey for consumers, rather than adding any form of value in the customer experience. Whereas today, the payment journey has become a central part of a travel business' customer experience.

Several factors have influenced this shift, including changing consumer behaviour and generational demands. In an increasingly digital world, today’s consumers expect businesses to meet their needs quickly and seamlessly. Travel companies that do not meet these demands risk paying the price. 

In fact, emerchantpay research has revealed that 66% of businesses in the travel sector are losing up to 10% in revenue due to payment inefficiencies. It's clear that travel organisations must evaluate and enhance their payments strategies to accommodate these demands, as well as the shifting regulatory landscape. If done successfully, merchants in the travel industry will be able to leverage payments to improve revenue and get ahead of competitors.

Adopting new, digital payment solutions

With millennial and Gen Z consumers growing up in a truly digital era, their payment preferences and attitudes towards money are different from their parents’. New payment methods are growing in popularity, from eWallets and Buy Now Pay Later (BNPL) to pay by bank transfer with Open Banking.

To accommodate these new, digital payment preferences, travel companies should look to add a range of preferred payment methods to their offering. For example, Open Banking is cited as an up-and-coming trend by 54% of payment professionals in the travel industry. In payments, Open Banking, also described as ‘pay by bank transfer’ or ‘account-to-account payments (A2A)’, allows merchants to enhance their customer experience by enabling payments from the bank directly. 

This makes transactions faster and more secure, offering bank-level security and immediate authentication. It also makes payments transparent, making personal finance management easier and providing shoppers with real-time updates to their account balance. All these features are important for customers when paying for typically high-cost items, such as plane tickets or package holidays. For travel merchants, offering Open Banking minimises the risk of chargebacks, therefore reducing associated fees relating to payment disputes and ultimately improving conversions and revenue. 

Other payment methods that travel companies should be aware of include digital wallets, which are becoming increasingly popular in regions such as Latin America. Airlines in particular, operating across different territories, can greatly benefit from preferred payment methods as over 30% of a typical airline’s bookings originate outside its home market, so accepting the right local payment methods across key markets is crucial.

Enhancing payment strategies to limit revenue loss

Adjusting payment strategies for optimal results could positively impact the revenue of the majority of businesses in the travel sector. In fact, 73% of travel merchants believe that making this change would improve revenue by up to 6%. 

In addition to embracing digital payments, travel merchants should look to update their payment strategies to address challenges such as fraud and security and adhering to regulation. For instance, travel organisations process a large volume of payment transactions and undergo extensive personal data collection, often making them a prime target for cyberattacks. Therefore, a secure and scalable payment gateway is critical for travel merchants. 

Furthermore, travel businesses can be prone to chargebacks. Travel merchants should prioritise understanding how to effectively dispute chargebacks and collect the necessary supporting documentation. It's paramount to engage with their payment service provider to foster a collaborative relationship and gain insight into their specific requirements for chargeback disputes, including associated timescales and potential costs. Taking proactive measures and ensuring access to evidence – such as proof of customer travel, prior refunds issued, and customer consent to terms and conditions among others can strengthen the merchant’s defence against chargebacks. 

Navigating changing payment regulation and compliance is also a challenge area for those in the travel industry, with four out of ten (43%) payment executives working for airlines burdened by the time and focus this takes. However, with the Payment Services Directive 3 (PSD3) expected later this year, it's crucial that travel businesses stay on top of changing requirements in payments. 

Driving success with the right PSP

Partnering with a knowledgeable and experienced payment service provider (PSP) can help travel businesses reimagine their payments strategies and overcome these hurdles. PSPs can offer strategic advisory, ongoing support and commitment to working as an extension of a travel organisation's payments team. 

When selecting the PSP to support with payments, identifying one that has extensive expertise in the travel industry and is known for its proficiency in navigating intricate international and local payment regulations and compliance standards is crucial. 

Furthermore, the right PSP will dedicate time to understand the business model and requirements as no two travel businesses are alike. By dedicating time to understand the nuances of a travel merchant's business model, the right PSP can tailor their services and solutions to align seamlessly with the merchant's needs. This entails investigating various aspects, such as the types of travel services offered (e.g., flights, accommodations, tours), the target markets, seasonal fluctuations in demand and transaction volumes, and the preferred payment methods of customers.

Moreover, a thorough understanding of the travel merchant's requirements allows the PSP to provide tailored support and guidance in areas such as chargeback management, fraud prevention and risk management. For instance, a travel merchant specialising in luxury vacations may have different risk profiles and compliance obligations compared to a high street travel agency. Additional criteria to look for include a range of global payment and integration options. 

Partnering with a PSP will also help to maximise the value derived from payments by granting access to in-depth payments data. By analysing payments data, travel payment professionals can identify trends in consumer behaviour, including the most popular and preferred payment methods and peak booking times, which can ultimately help to optimise payments and increase conversions.

The path to payment optimisation

Embracing digital payments and APMs is the way forward for travel organisations looking to improve customer experience, drive growth and put a stop to revenue losses. This can all be made possible with a strategic PSP partnership. By working with the right PSP, travel organisations can stay ahead of payment trends, overcome challenges and align payment strategies with customer priorities to achieve the best business results. 

 

 

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