Travel Industry Payment Innovations Enable A Quick Rebound to Those that Dare

Few industries have been significantly impacted more in the past two years than travel, following healthcare closely. In 2020, the global travel and tourism sector lost nearly $4.5 trillion due to the severity of the COVID-19 pandemic. However, since the world has moved past the heavy travel restrictions, the full rebound of travel has yet to formalize. The problems exist in nearly every section of the process, from the supply chain challenges to the reluctance of travelers to commit without knowing in advance that they will be fully refunded in case of an issue. 

There’s no denying that the travel industry is slowly making a comeback. Yet, like the labor changes that cannot revert to their previous state, the travel industry has changed forever. The pandemic has shifted how consumers plan for their travels and how much they’re willing to spend. According to a survey of 8,700 travelers across the US and Europe, 70% of Europeans and 64% of Americans indicated they would be more likely to purchase travel insurance for protection if plans need to change due to health issues or additional government restrictions. As more people become willing to pay additional fees for their flights, the divide between bookings, payments, and service redemption widens, creating enormous friction for an industry that has been relatively slow to innovate.

However, new opportunities are on the horizon, with more consumers changing their habits. Travel organizations can capitalize on these traveler trends by utilizing new technology to innovate and develop new offerings that meet consumer demands. Companies that embrace new innovations will prosper. 

Rethinking Payment Options 

Travel has always been a high-risk sector from a payments perspective because of the significant time between payment and service delivery. Group or educational travel is even riskier due to the possibility of cancellation of a whole group at once. Customers are more aware of the dangers of booking flights, hotels, and guided tours weeks or months in advance during uncertain times, yet the supply chain challenges do not leave them much choice as it is either purchase in advance or don’t travel at all. The result is that travelers issue chargebacks at a frightening rate on travel products. A chargeback is a one-sided cancelation of the transaction if the planned trip was according to the promised service. The request is issued to the credit card company or the bank, and the travel company must fight it, normally with very little success. High chargeback rates will raise the processing rate prices and add mandatory cash reserve requirements for travel companies. Some processors are not even willing to process any travel transactions due to these problems. This leaves the companies between a rock and a hard place: high competition on one side and rising costs on the other. 

The travel industry might be in the worst position it has been in for years—with high demands from clients, rising costs, high reserves, and ever-raising chargeback rates—but not all is bleak. Innovations in the payment services for the travel industry are changing the way they do business and allowing those that dare and think outside of the box to prosper. Asaf Darash, CEO of Regpack, an innovative payments platform that provides highly customizable billing options, is familiar with some of the challenges prevalent in both the payment and travel industries. 

“The implementation of technologies that protect the supplier and give value to the end client simultaneously has flipped this around,” Darash said. “Companies implementing autobill and purchase protection have seen a 16% reduction in trip cancellations, with 32% more reservations and 35% more completed payments. They are leapfrogging over their competitors that are still doing things the old way.”

If travel companies want to ease payment flows and ensure the best customer experience possible, they will need to invest in tech that removes friction, reduces cost, and enables businesses to derive greater value through improved customer service. Some methods to think about include:

• Buy now, pay later. The convenience of BNPL can help spread the risk for customers by allowing them to make payments over an extended period as their trip approaches. For travel providers, it’s a more straightforward way to offset liquidity issues.
• Limiting Cross-border payments. Consumers like to pay in their home country’s currency—it helps them understand the cost upfront through the booking process and avoid their issuing bank's foreign exchange fees. Travel companies that offer multi-currency pricing to pay suppliers in the currency they require often see higher conversions.
• Installment Payments. This allows clients to break down the payment into multiple installments automatically charged through time. The added benefit is that it lowers the probability and ability of chargebacks as the timeframe passes. The fact that there are multiple payments enables travel companies to win the claim against the service not supplied. Companies implementing this technology have raised sales by 37% on average.
• Flexible booking options. Cancellations and rescheduling wastes too much time. With digital payment automation, payments, refunds, and travel credits can be processed immediately and reallocated to new dates or services. Customers have more autonomy over their bookings at no cost to the business.

The right payment technology can reimagine approaches to accounts receivable (AR) and accounts payable (AP) optimization through automation. Darash’s payment platform, for example, allows companies to set up flexible payment plans for various travel services to create a customizable experience for travelers. Organizations using Regpack’s software experienced a decrease in cancelations or rescheduling and an uptick in the number of payments coming in, which translates into more cash flow. 

Implementing secure and user-friendly digital payment options builds brand loyalty and ensures repeat business, which is critical for travel industry organizations looking to prepare for a new wave of voyages.

2020 was the worst year for air travel, but the industry is slowly coming back. Delivering the best experience for consumers who are returning to travel starts with fast, frictionless, and safe experiences through innovative payment solutions.

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