July 9, 2019
By Bart Tomkins, managing director, payments, Amadeus
Travel is a large industry no matter how you choose to define it. The latest numbers from the World Travel and Tourism Council show travel contributed $8.8 trillion to the global economy in 2018, equating to 10.4% of all economic activity. Clearly, this economic activity is underpinned by a wide range of payment flows from consumers to agencies, airlines and hotels as well as from intermediaries like agencies to their suppliers. But it's only relatively recently that the industry has grasped the strategic importance of payments.
Technology has been transforming how people search, shop and book travel. Innovations in search technology that inspire travelers along with rapid advances in personalisation have enabled more satisfying experiences and increased revenues. These developments have typically overshadowed the role that payments play in the digital travel experience. In short, payments hasn't been the sexy aspect of the digital travel revolution. But that is beginning to change.
Heightened traveler expectations
Travelers have been exposed to the simplicity and first-class payments experience offered by digital leaders like Amazon and Uber. When you can pay for virtually any product to be delivered to your door with a single-click, why should it be any different when you're booking travel?
The industry has listened and we're beginning to see travel brands prioritise the critical role that payment plays in the customer experience. Japan Airlines is a case in point. The airline offers 26 versions of its website in 12 different languages with digital an increasingly important channel, particularly for growing the airline's all important international sales.
The complexity of the airline's international business meant it needed to cater for a wide range of payment methods and work with multiple Payment Service Providers (PSPs) across markets. Since working together we have been able to support the airline's drive to deliver an outstanding experience by removing the need for travelers to be re-directed to individual PSP sites.
Costly and complex
As part of a research study we commissioned in 2018 we found that on average, travel companies spend about 6.2% of revenue on payments. For airlines that benefit from economies of scale, this figure falls to around 3% but for smaller retail travel agencies it can be as high as 7.5% of total revenue. Clearly this situation isn't sustainable and there is an increasing desire from travel brands to streamline their approach to payments.
At Amadeus, we have invested significantly to provide technology that delivers a complete single-view of a travel firm's payment flows. The platform delivers analytics that enables a business to understand the relative performance of its PSP partners in different markets and to easily swap them in and out accordingly. An orchestration layer means companies can set this process up to happen autonomously based on predefined objectives such as minimising cost or fraud.
Driving B2B payments innovation
The travel industry is built on close and collaborative partnerships; there are few closer than those of travel agencies and the airlines that supply them. According to the International Air Transport Association (IATA) agencies pay airlines $236 billion each year, typically using traditional corporate cards or good old fashioned cheques. In recent years, this situation has changed to incorporate single-use virtual cards delivered via B2B digital wallets that make paying suppliers easier and overcomes the long-held problems of spreadsheet-based payments reconciliation and higher than acceptable levels of fraud. But the industry is now asking how payments can be a strategic enabler of greater collaboration.
Today it's clear that payments is taking its place in digital travel and technology innovation. Payments has rapidly become a differentiator for travel brands that are now able to deliver an outstanding experience whilst mitigating cost and complexity. With new regulations like PSD2 spurring even quicker innovation over the coming years, We expect this trend to continue.
Cover photo: iStock
Topics: Carriers / Operators, Mobile Payments, Online Purchasing, Technology Providers
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