A temperature check on crypto payments on the go

Last year was a record for the cryptocurrency market, which soared to over $3 trillion in value in a short period in November 2021. Bitcoin in particular made headlines last February when it reached $1 trillion in market capitalization – sparking the debate over whether cryptocurrency was going to catch on up as an accepted method of payment when travelling.

Today, as the market struggles with inflation, Bitcoin’s price has fallen below $20,000 as of Monday, and experts expect the ups and downs to continue.

Travel providers that accept cryptocurrency say they experience a similar fluctuation — when the price of Bitcoin, or other cryptocurrencies, goes up, so does business — but it’s not unusual, says CheapAir’s Jeff Klee.

“[Sales made with cryptocurrency] is making historic ebbs and flows with the price of Bitcoin, says the co-founder and CEO of the online travel agency, which began accepting Bitcoin in 2013.

“Right now, for example, it’s definitely gone down a few notches and we expect it to go back up. It is by no means a perfect science, but… if the price of crypto goes up by 10%, our crypto business goes up by about 5%. It tends to be about half, and vice versa: If [crypto price] goes down 10%, the business goes down about 5%.”

Latvian airline airBaltic, which claimed to be the first airline to accept Bitcoin in 2014, has noted a similar trend: “At the moment, the market is in a correction stage, and it is also visible in our latest booking statistics,” says Artūrs Garais, Web3- project manager at airBaltic.

“At the moment we are seeing a trend of more people preferring to hold onto their cryptocurrencies rather than spend them flying.”

In comparison, last September the carrier reported that during the third quarter of 2021, the number of orders paid with cryptocurrencies increased by 44% over the same period in 2020.

“With the current market situation, [crypto] payments are not very popular at the moment, continues Garais.

“But we’ve been in these cycles before and recovered. The situation at the moment is a little different because of the general economic situation, but since it’s more than currency, we think that in the long term there should be a recovery and growth. »

Digital dilemma

Apart from market volatility, there are other barriers to the widespread use of cryptocurrency payments in travel.

First, in developed countries, “credit card companies have a pretty strong stranglehold on financing and how people pay,” says Klee. “If you’re a consumer, you like the fact that you get points. You like the fact that you can call and cancel a charge.”

Of course, consumers pay for credit card services, “but nobody realizes how much they’re paying for it,” he says.

“That’s what’s really great about digital currency — it eliminates a lot of those costs. But because people don’t realize they’re paying those costs, they don’t see the value in cryptocurrency.”

For travel suppliers, allowing customers to pay in cryptocurrency comes with its own technological challenges. Many hotels, for example, still struggle to accept credit card payments over the internet, says James Montague, senior director of security and integrations at Shiji Group.

Credit card companies have a pretty strong stranglehold on funding.

Jeff Klee – CheapAir

“Even PayPal, AmazonPay or other alternative payment methods are a stretch for most people. The whole deposit process too, when you check in to keep your card for, say, the minibar or damages, would also be quite difficult, as there is no way to that at the moment with crypto – you pay a deposit, but then when the refund comes, the value of that crypto may be different.

“For all these reasons, and many more believe me, in the coming years we don’t see this as a big deal except for maybe a very small number of hotels.”

Travel providers are also likely to need an intermediary platform, such as Coinbase or BitPay, to handle the payment.

“[Travel providers are] adds crypto to which they can add to any other non-major currency they don’t currently accept or operate in… and almost certainly immediately convert that cryptocurrency to “fiat currency” – the normal, real, non- the digital money we all know and love, to avoid the risk of exchange rate volatility, says Matthew Chapman, co-founder and CTO of travel booking technology provider Vibe.

“If you think about this, consider that all these payment platforms require a small fee from providers, and of course there are the implementation resources required to do this. There are also tax implications in some jurisdictions, which makes additional accounting necessary.

“Basically, you have to ask yourself, does accepting crypto make it better? Right now, it probably doesn’t, but that could change over time.”

Leverage loyalty

That said, with more than a trillion dollars invested in crypto, the travel industry shouldn’t sleep on the opportunity, says Alice Ferrari, founder and CEO of airline API technology provider Kyte.

“Since crypto is a very easy asset to liquidate, many investors are tempted to use their crypto funds to pay for large one-time items like a vacation. So why not make that purchase decision easier for them by allowing them to pay directly in crypto?

“Right now, this is not a very popular form of payment for sure. But that will potentially change as stablecoins – cryptocoins whose value is tied to real currencies like the dollar or euro – become increasingly popular. Maybe now could be the time to get in ahead of the trend?”

Cryptocurrency, and the blockchain technology behind it, can also help travel brands inspire customer loyalty. AirBaltic’s Garais says that for loyalty, the biggest benefit blockchain provides is the transferable token.

“It allows us to create a loyalty that can be transferred to someone else, as current loyalty systems do not provide any opportunity to transfer it to your friend or family or someone in the secondary market. Ideally, it creates an asset for every customer who has it, says Garais.

“There is also an opportunity to create personal loyalty programs with NFT technology … to provide benefits such as a window seat or a free meal during the flight. Of course, this would also be possible with today’s systems, but it would take hours of manual work.”

Ferrari also supports the benefits of blockchain technology on the travel experience. “Regardless of your views, there’s another important point to consider about crypto and travel: The blockchain technology behind it will soon be used to power all kinds of travel experiences, especially loyalty and points programs as they become — perhaps completely unknown to the user – NFTs based on blockchain.

“We’re really just at the beginning of things, so a lot of huge opportunities we can’t even imagine for travel are likely to arise indirectly as a result of crypto.”