Meeting the challenge of changing customer behaviour in travel payments

What changes in customer behaviour are impacting the travel market?

The digital travel market is booming at a double-digit growth rate, driven by emerging markets and the millennial generation that does everything digitally. Smartphones are now the crucial channel for travel companies, not only in mobile-first countries like China, but also in more internet-mature countries where travellers use multiple devices along their customer journeys, constantly moving between website, mobile web, and app. There are also hundreds of new payment methods across the world, including global e-wallets like Apple Pay and PayPal, mobile-based payments such as Alipay and WeChat Pay, bank transfers, and pay by instalment. We expect usage of these alternative forms of payment to overtake card payments across the globe soon.

Do you think travel customers’ expectations have changed? What are they looking for, especially on the payment side?

We have observed a huge shift in customer expectations regarding the payment process. First, travellers want to use mobile-specific wallets and biometrics to pay more quickly. Second, they expect to be able to pay with their preferred payment method, whatever that is, wherever they are. If they can’t use it, as many as 20% of customers may abandon the transaction. That’s a huge missed opportunity! Third, they want to be able to mix and match different payment methods, for example private and corporate credit cards, loyalty points, or vouchers. Finally, customers want to have a seamless experience across devices, so they can store their cards for use in every channel.

Are travel companies ready to deal with these changes?

Most travel companies, especially those operating on a global scale, are struggling to deliver the new payment experience that customers expect. Until recently, a traditional payment gateway accepting the main card schemes was good enough to manage a global ecommerce business. Now, travel merchants are finding that this setup just cannot deal with the rapidly evolving market and the need to roll out multiple payment methods in numerous markets and on various front ends.

Travel merchants know a new digital payment capability is a strategic necessity, but it is incredibly complex to implement it with a fragmented or legacy solution. They need a new generation, omnichannel platform connected to an eco-system to add all these proliferating payment methods quickly. There is also great potential for travel merchants to further optimise their global payments strategy by linking in more local payment partners and acquirers who are closer to their customers.

You are talking about cross-border transactions. Is this a major pain point for travel companies and could they manage them better?

Yes, and yes! Cross-border transactions represent anywhere between 10% and 90% of card transactions for travel merchants, depending on the size of their domestic market. These transactions incur higher interchange fees and have a higher failure rate, so they reduce revenues, erode margins, and damage customer satisfaction. It is a significant pain point.

One way to mitigate this is to adopt a multi-acquirer strategy using local, in-market acquirers. These are often more cost-effective and provide a much better acceptance rate for local card transactions – this means using a payment platform that can manage the routing of transactions to multiple acquirers based on dynamic business rules. That way, each card transaction is sent via the optimised route to minimise cost and maximise acceptance rate.

How can travel companies manage the integration of this proliferating list of payment methods? What are, in your opinion, the best practices for mastering payments in the travel industry?

The speed and diversity of new, alternative forms of payment around the world certainly presents a complex challenge for travel companies, but this is also a great opportunity to build a significant competitive advantage with the right digital payment strategy. However, it is very unlikely a travel company will keep pace using a legacy payment solution.

The best practice is to adopt a single, omnichannel payment platform – ideally one that is delivered as a flexible service, avoiding major IT infrastructure outlay. It needs to be independent, allowing merchants to better negotiate with their payment partners, switching them on and off as required. With such a platform, they will regain control over their payment strategy and be able to monitor all payment transactions by channel, market, and acquirer.

The second priority is to build the optimal combination of payment methods and acquirers within each of their markets. To do this cost-effectively and quickly, travel merchants should seek to connect to an agile payments eco-system that can offer both the global and local payment methods their customers want.

Next, I think travel companies must provide a seamless customer payment experience across all their digital channels (website, mobile web, and native mobile app), optimising the user interface and eliminating any payment friction. They need a responsive and adaptive hosted payment page for the website and an effective SDK for native mobile apps. All processes should be truly omnichannel to ensure continuity.

Last but not least, travel companies with international activities should really execute a multi-acquirer strategy to optimise the routing of each card transaction and improve both acceptance rate and cost per transaction. This dynamic routing capability will enable them to reach the next level of performance in payments.

This interview was first published in our Cross-Border Payments and Commerce Report 2019 – 2020, which provides a comprehensive overview of the major trends driving growth in cross-border payments, cross-border commerce, and marketplaces.

About Stephane Druet

Stephane is responsible for developing the product portfolio and brand at CellPoint Digital and is committed to helping travel businesses exploit the potential of their digital channels. He has years of experience in travel technology, working with major players like Amadeus and Travelport Digital.

About CellPoint Digital