Blog | 5 min read
Copy linkThe last three years have revealed the resilience and need for travel companies to evolve from the
antiquated processes that have hindered their capabilities to expand. More importantly, it has exposed the
need to implement a payment strategy that will leverage revenue diversification.
We have all learned throughout this period that the travel industry has been forced to transform and
innovate. Even though the pandemic impacted the industry severely, it also acted as a springboard for
ideation with a twist of survival skills. That in turn fueled many sectors of the industry to unfold a trajectory
that expanded beyond their current offering and process.
All verticals of travel have been challenged to inherently build a strategy that will support their travel
business for the future. Travel post-COVID looks very different today with the heavy increase of international
travel and personalized experiences. In addition, there are generational trends that continue to drive the
industry to think outside the box at a rapid pace.
This combination can add further complexity to online travel agencies and other verticals of travel if not
prepared. Travel companies’ payment strategies need to include a global outlook in order to stay relevant in
the expanding trends of the industry.
The continued economic growth in the emerging markets and the past hurdles the markets have presented
will prompt the evolution of a global payments strategy, which will act as the guiding path for all markets
globally. Developing an enriched payment platform will allow the core of the business to reap the benefits
and add a seamless experience for the end traveler.
The fear of going beyond borders is still real, due to the complex banking process, high cost and heightened
regulations, which continue to make companies hesitant to power ahead their expansion.
Emerging markets
Today a selected group of payment providers that specialize in the emerging markets, who have worked on developing direct connections with the exotic critical markets, will expedite the expansion time to market. In addition, it will immediately provide a payment solution for customers and vendors while reducing cost, which in turn will generate revenues that will drive growth and foster operational robustness.
The result will be magnified by all ends of the business, which will provide travel companies with a direct understanding of their customers’ needs. A suite of payment products needs to be in place to act as the driving force of the payment ecosystem, coupled with enhanced technology including fraud prevention and chargeback mitigation.
The perception of the money movement will change as a prosperous payment strategy will be embedded as a key part of the business. The movement is already here, which also includes vital partnerships to encourage an expedited inclusive global payment readiness. Transformation is inevitable, the global payment providers are responsible for pushing a fast-track approach that continues to shift the payment expectations to offer a seamless global money movement, all while reducing transaction costs and accelerating real time payments.
Uplifting the thinning profit margins is also an area that travel companies are heavily focused on as the expansion must make monetary sense - that continues to add the high importance of products to generate income from various streams, while optimizing payment strategies. Products such as virtual cards are still the preferred payment solution due to competitive rebate schemes and versatility.
However, the industry is ready to explore all viable payment solutions that will provide not only profitability but also a seamless process. Expanding virtual cards to the rest of the world continues to be at the forefront for most travel providers in conjunction with payment options that will facilitate the process when virtual credit card acceptance is nonexistent. In addition, suppliers are also leveraging B2B payouts to monetize further opportunities. Examples include:
- Local tourist guides who are providing personal experiences globally who travel companies would like to add to their portfolio of travel offering.
- The rise of alternative accommodations, or the so-called single property owners.
Virtual card trends
The forecasts of worldwide virtual card transactions soaring in the billions continue to unfold. It’s more important than ever to develop a key payment strategy for the future. Ideally, a healthy mix of solutions like B2B payouts, virtual credit cards and a card-to-account model should be included. This will leverage the industry to propel it to new heights.
The time to expand to crucial, exotic markets is here. Recent trends show that the shift to long-haul flights continues to increase since 2022, and there is no sign of a slowdown. With such high demand for international travel, the rise of global expansion and cross-border payment strategies within OTAs, travel companies and the hospitality sector has become very relevant.
The online space continues to rapidly gain market share. This, in addition to a high increase in smartphone app adaptability, will allow OTAs to organically drive their global growth.
Trends continue to reflect that APAC continues to make strides in the OTA market expansion, followed by Western Europe, Eastern Europe, North America, South America, the Middle East and Africa.
Digital payment strategies and expansion continue to accelerate in the industry, along with the demand for international flights and online travel providers, digital wallets and digital cards. It’s vital that businesses within the travel industry seek and adopt digital payment strategies to achieve continuous growth. The industry needs to continue to push forward with innovative technologies and optimize from the traditionally rigid settlement schemes that are hindering the efficiency of payments between most sectors of the industry.
The industry continues to search for innovative ways to move money on demand without succumbing to high cross-border fees. From a time-to-market perspective, securing direct banking rails can delay a company’s deliverables. But these payment rails are crucial, especially for the “rest of the world” where most payment providers don’t have a direct presence or visibility.
The solution for many businesses is to choose a global payment provider that provides B2B payouts with direct banking capabilities, as well as a diversified card strategy that further leverages travel companies to remain fluid in the payment process. This will result in opening access to emerging markets, reducing processing fees and providing higher card acceptance, which can overall lessen the overall financial impact and increase profitability.
According to PwC, the emerging markets are home to 85% of the global population. India and China’s 2.5 billion people alone represent more than a third of the world’s population, making even modest market developments in fast growing economies extremely significant. Customer expectations are driving a significant change in the payments industry in these countries.
The value of partnerships
It’s no secret that one of the growing concerns for travel providers wishing to expand to the rest of the world is finding the right payment partner - one who can support their expansion while reducing the traditionally high cross-border fees that weigh down business profit margins.
Banks have traditionally had the upper hand in this situation and are looked at as the “natural owners” when it came to international transactions. The world of payments has been revolutionized by emerging payment companies that bring agility, innovation, efficiency and a less expensive way to move money on demand. Of course, this brings along the growing concerns of alleviating the scrutiny of compliance, regulatory requirements and technical infrastructure.
We continue to hear that regulatory measures are expected to continuously grow as the digital payment space expands. Partnering with a trusted and tested global payment provider that has developed a rich standardized compliance process and direct banking relationship will leverage a frictionless experience.
The travel industry is not shy when it comes to complexities, and adding a payments path heightens additional concerns. The travel industry is by far the most challenging payment vertical, because it touches such a wide range of sectors and experiences volatile complications and disruptions.
Let’s not forget the dinosaur in the room, which is the providers evolving their reservation or PMS systems. Since a large majority of travel providers own and manage their own IT systems, many of them hesitate over launching IT projects of such a high magnitude. This exemplifies why so many of these providers are stalling when it comes to evolving their payment strategies - optimizing away from the antiquated systems that are already in use comes at a significant expense. Without a commitment to optimize their back-office technologies, the payments transformation will be inhibited.
Focusing on the right payment strategy will allow travel companies and providers to further expand their capabilities in emerging markets and fast-track their growth. Statistics show that the high rebound in travel is expected to continue.
TerraPay’s virtual card solution can offer up to 66 currencies and global issuance with a focus on emerging markets. This will allow all travel sectors to seamlessly move money in real-time globally without the added cost of third parties or aggregators.
