Innovation in the way we pay for products and services has progressed steadily; thus, between 2008 and 2016, more than 5,000 new financial technology companies (FinTech) were created around the world that received more than 60,000 million dollars of investment from venture capital firms. This momentum has led to innovations that range from contactless payments and encrypted and secure digital currencies to instant payments. A new study by PYMNTS suggests that, at present, the travel industry is willing to take payments to the next level.
This new study, for which 78 interviews were conducted with heads of payments in hotels, airlines and tourist intermediaries, highlights a growing willingness to innovate in terms of payments. More than 95% of the companies interviewed plan to introduce innovations in the forms of short-term payment and more than 14% plan to undertake “many innovations”. Among the factors that drive innovation, the satisfaction of customer needs was mentioned, an important objective being the constant emphasis on offering a more personalized payment experience.
Despite these good prospects, those responsible for payments in the travel sector stressed complexity as a major obstacle to innovation today; Thus, 85% of the companies confirmed an increase in the number of payment methods accepted during the last five years. The average of payment methods accepted by the respondents is nine, and during the last years the companies have incorporated an average of three new methods. In the same way, the vast majority of travel companies (more than 80%) work with between three and ten different payment service providers, which further accentuates the operational complexity.
Bart Tompkins, Managing Director, Payments de Amadeus, commented: “The travel industry is at a key moment in terms of innovation in payments. Over the next few years, the sector will have a real opportunity to improve the customer experience and manage costs through innovation thanks to a large number of advances in financial technologies or FinTech. Our recommendation for those companies that want to innovate in the field of payments is to adopt a strategic approach: define what constitutes a differential competitive advantage and what should be outsourced. Then, when evaluating future innovations, they should focus only on those that improve the customer experience, address complexity or reduce direct or indirect costs. ”
Tompkins added: “The travel industry is more global than any other and requires forms of payment that serve an international customer base and a multitude of regulatory frameworks that must be managed.” He concluded: “Despite all these challenges, there is no doubt that the promise of offering a more personalized experience is encouraging the industry to analyze again how payments can offer a competitive advantage.”
The study also reveals that travel companies spend an average of 5.3% of their income in managing payments, which includes acquisition fees, commissions to all suppliers and other indirect costs. That supposes an imposing figure of 74.500 million dollars in the set of the sector. Smaller companies pay disproportionately high commissions, so that those who bill less than 15 million dollars pay on average 7.5% of their income. That contrasts with the mere 3.8% paid by travel companies that annually invoice more than 1,000 million dollars.
The study was carried out by the prestigious PYMNTS information portal during the first semester of 2018. Telephone interviews were carried out with 78 responsible for payments of airlines (9), hotels (41) and tourist intermediaries (28). The respondents belonged to entities of different sizes and more than 60% of them invoiced at least 100 million dollars annually. The study was commissioned by the Amadeus Payments division, which processes more than 117,000 million dollars annually in payments for more than 1,000 travel companies.