Imagine this: you suddenly decide to go and have fun in an exotic place, such as the Bermuda Islands, with your friends for a weekend. You go on your smartphone, access Expedia for flight suggestions and TripAdvisor for best attractions and hotel deals, pack, and then go straight to the airport.
At the airport, you check your flight details on your smartphone and receive travel alerts like gate changes, delays, and other pertinent information. On the plane, you turn on your Wi-Fi to watch a film. When you get off the plane, you connect to local destination details, transportation services, and hotels right away.
The above scenario might sound like one from a Hollywood film; however, the part involving the use of a smartphone is very real. In fact, more and more travelers are using mobile devices to pay for travel-related services and an increasing number of service providers are implementing mobile payment options to help consumers purchase travel products and services for their holidays.
The travel & tourism industry, brimming with opportunities
There are currently four structural changes in the payments ecosystem that provide new opportunities for airlines and traveling businesses. These are:
Digitalization – a revolution that has changed the entire customer journey from research, booking and check-in at the airport, to inflight activities. According to a white paper released by Wirecard about airline payment solutions, 95 % of aviation companies see digitalization as an opportunity, with 68 % saying that holding on to traditional business models hinders innovation in the industry.
Moreover, as digital natives are getting comfortable with online travel experiences, mobile bookings are expected to grow exponentially over the next five years. According to industry reports, the travel booking payments through mobile in Europe is expected to record a CAGR of 9% to reach USD 56,300.9 million by 2025. Other examples of digital innovation within the airline industry include in-app payments (e.g. EasyJet has enabled one-touch in-app payment via Apple Pay since 2016) or in-flight services.
Changing customer expectations Customers nowadays expect simple, fast, and local payment options with capabilities such as chatbots to book flights. Companies should meet these new demands by turning to international experts to integrate modern payment systems for payment processing. By integrating data-based services, airlines get to know their passengers and their preferences better and can use this information to make individual offers and create a personalized user experience.
Regulatory changes Optimizing conversion is a key goal for airlines. To improve conversion, it is key for an airline to understand an evolving regulatory environment dominated at the moment by (a) Payment Services Directive 2 (PSD2) in Europe and (b) changes in IATA Resolutions worldwide. For instance, starting September 2019, all remote electronic payments by card or credit transfer in the EU (with some exceptions, e.g. for low-value transactions) will require Strong Customer Authentication (SCA). Currently, it is still unclear whether/ which commercial card transactions (e.g. when a corporate customer uses a lodged account or a virtual card) are exempted from SCA. Also, since January 2018, the EU has prohibited merchants from surcharging debit and credit consumer cards issued in the EU and subject to the Interchange Fee Regulation (IFR).
According to Pascal Burg of Edgar, Dunn & Company, this ban is most definitely forcing airlines to rethink their payment acceptance strategy, for instance by accepting alternative payment methods or by only surcharging commercial cards.
New models/entrants Digital innovators and disruptors such as Alipay in China redefine the payments industry: they are cheaper, include loyalty programs, and can be linked to a mobile wallet. Did you know that you can use Alipay even at a hotel situated on Mount Everest? You just have to scan a QR code that enables you to pay, get all the touristic info available for that area (tourist attractions, restaurants, ways to spend your time), and receive promotions/discounts.
We might experience some turbulence
Still, introducing innovative payment methods that enable airlines and tourism companies to meet the customers’ expectations and stay competitive on their market might pose some challenges for the industry’s players.
The complexity of accepting cross-border payments
While consumers experience the typical mobile payment process in an easy and simple way, the suppliers’ end of the mobile payment landscape is more complicated. A typical mobile pay transaction flow involves the collaborative efforts of various industry entities such as mobile payments providers, merchants, financial network service providers, card issuers/banks, POS mobile readers, tokenisation and cryptogram service providers.
As a result, , it is particularly important for traveling industry merchants to ensure smooth, collaborative relationships with each of the providers along the supply chain when expanding across borders, with particular attention paid to the process of handling issues such as refunds and chargebacks.
Fighting payments fraud
With airlines pushing for more direct bookings and the accelerating use of mobile as a booking platform, incidence of fraud is rising. New research revealed that in the UK alone, fraudsters stole more than GBP 7 million from unsuspecting holidaymakers and other travelers in 2018, with the greatest proportion of crimes (53%) related to the sale of airline tickets. As fraud continues to be a major source of revenue loss for the global airline industry, airlines must protect themselves and their customers against payment and non-payment criminal activity.