COVID-19 has undoubtedly provided the travel industry with its greatest challenge in modern times. Most businesses in the industry, particularly those based in Europe and America, are now well and truly in the eye of the storm, seeing the long-term impacts of lockdown and quarantine measures on operations. However, we are beginning to see some clouds breaking away – and optimism is still in tact. Against this backdrop, there is a crucial role for technology providers in the payments sector in travel’s resurgence. Financial IT spoke with Anant Patel, Vice President EMEA & APAC at leading global technology payments company, WEX, to discuss these challenges and reveal what the future holds for supplier payments in the travel sector.
Finacial IT: What challenges has COVID-19 posed for supplier payments in the travel sector?
Anant Patel: The impact of COVID-19 on industries across the worldis highly visible, most notablyacross the travel and tourism sector.
In fact, the World Travel and Trade Association estimates 100 million tourism jobs are on the line, with travel companies set to lose billions of dollars. This is impacting nearly one-third of an industry that employs over 330 million people. New data shows that FTSE travel and leisure companies have issued 54 profit warnings so far in 2020 – equating to more than two years’ worth of warnings in less than six months.
We’ve seen these challenges lead to heightened attention towards the value supplier payments have for our customers.The predominant and most apparent challenge has been around the security and risk that travel firms are exposed to across their payments, and while these problems have always existed, the pandemic has brought them to the forefront as a priority to solve as it has strategic long-term benefit.
Faced with record numbers of cancellations, many intermediaries and travel companies have not had effective and efficient payment technology and processes in place to ensure smooth refunds. In fact, many firms have been relying on outdated payment methods such as cash, putting them in a weak position to dispute transactions with the many suppliers involved. Not only is this impacting cash-flow, but also reputation. New research from Which? shows that trust in the travel industry has dropped from a net score of nine in February this year to -12 in May – a drop of 21 points, attributed to the issues and complications around refunds.
Other long-term challenges will be removing the high costs of manual, inefficient and outdated payment methods and processes. For the travel companies that do get over this hurdle, there is an urgent need to streamline efficiencies so they can focus on their primary business: Getting customers out the door and on their next trip. Being able to cut costs, wipe out inefficiencies and automate once manual systems will therefore be crucial in allowing companies to navigate the financial fallouts of this pandemic.
Finacial IT: What is the role companies operating in the technology payments space play in helping the travel industry recover?
Anant Patel: The payments sector has an incredibly important role to play in helping travel customers get back on their feet.
We know travel companies are going to need to adopt more sophisticated payments technology in general as they look to drive efficiencies in their business. As a result, we are likely to see the proliferation of virtual card (VCs) adoption, to help solve some of the security and risk problems the pandemic has exposed. When travel companies use a VC, it benefits from chargeback rights set by the card networks like Visa and Mastercard. This provides a high amount of assurance that the travel company can get its money back in the rare, but possible case that things have gone wrong, and is ineligible for a chargeback rights. VCs also protect travel companies from its customers private information being shared to third parties, and also helps prevent damaging data breaches. Driving out risk for our customers is a huge focus for us at WEX. Moving forward, it is likely we will see a continued move away from manual and cash supplier payments to automated as firms set to prepare themselves for future challenges. While VCs are not new, they will continue to become increasingly important within the next year.
Payments will also play a crucial role in supporting the travel industry’s key focus in getting customers back to travelling. Operating on already thin margins and with likely reduced manpower, companies will urgently want to make their lives easier by streamlining supplier payments processes. Deploying technology that can do this at scale, efficiently and effectively will therefore be crucial. Payments companies will need to be able to provide a seamless solution that can automate, reduce manual workload and drive efficiencies so that companies can save money and focus on core business priorities.
Finacial IT: What sort of technologies and innovations might we see emerging from payments companies to help travel manage the new, challenging landscape?
Anant Patel: Virtual Cards will be front and centre for helping travel companies recover and mitigate against future risk, but we may also see some new and innovative technology uses come to help counter some of the other, unintended consequences of COVID-19.
As we see an increase in fraudsters leveraging the global pandemic as an opportunity to target companies under pressure, we will see more Artificial Intelligence (AI) weaving into payments platforms to act as a solution for the rapid escalation of nuanced, highly sophisticated fraud. The previous rule-based fraud engines and simple predictive technology will struggle to manage the scale and severity of today’s fraud attempts. Machine learning and AI can therefore be used in payments to spot anomalies and discern if a given transaction or series of financial activities are unusual, fraudulent or not, alerting analysts immediately.
AI also has the ability to move quickly in a fraud crisis or security breach, which is needed to take on these challenges and quickly problem-solve. In addition, AI can enable digital businesses to gain greater control over chargeback rates, decline rates, and operational costs so that business objectives can be achieved – all aiding a smoother recovery from the pandemic.
Finacial IT: What is the future of travel going to look like – do you think there will be a silver lining?
Anant Patel: The rebuilding of confidence in the industry is not something that will be achieved over night – it will take time and as an industry we need to prepare to deal with the challenges that come with the nature of a pandemic such as this one. While the travel industry may never be quite the same as we know it, it is a resilient industry and there is definitely light at the end of the tunnel.
Green shoots are sparking in some regions, such as China, South Korea, and so we can take positives our of markets that are almost over the hump and starting to flatten the curve. Other countries also recently recovering are now unveiling plans to begin to open up their countries for tourism, such as Spain, Greece and the UAE. We are also likely to see a boom in domestic travel, which will provide companies with new opportunities, with cases such as South Korea proving this. What is more, the new creation of “travel bubbles” which we are seeing develop across Europe, may help revive some travel economies, which will mean a return to normal, albeit, one very different from the previous status quo.
Finacial IT: From a relationship perspective, what advice would you give to other payment technology companies in managing and supporting clients as we emerge out of the crisis?
Anant Patel: Our best bet of making this happen will be for us all to make decisions when it comes to payments with a long-term view in mind, not just the short-term crisis. Those that can do this well will help the industry recover. At WEX we are staying very close to our customers to see how they are feeling, offering feedback and advice around short-term options but with a long-term lens. The key to cushioning the impact is supporting each other over the next few months and keeping focused on the long-term goals of resurgence.