The post-pandemic travel boom is creating a travel and fintech convergence investors should be aware of
The unprecedented travel demand that characterized the first half of 2022 is expected to increase during the autumn and winter months. More leisure travelers than ever are back to booking tours and globetrotting.
In addition, there has been a significant increase in domestic and international travel and the formation of a new “mixed” or “bleisure” (business and leisure travel) travel category, replacing business travel. Now people go on holiday or visit family and at the same time set business meetings, attend professional events and continue working remotely, or vice versa. Others make spontaneous decisions to extend a business trip for a weekend stay or invite a partner on a romantic holiday.
“Dazzled” or “bleisure” travelers are looking for more security and ways to minimize the impact of travel disruptions. They need a lot of flexibility with cancellations and changes, for example by extending or upgrading hotel stays or adding new destinations and travel partners, creating the perfect environment for convergence between fintech and the travel industry. This opens up significant opportunities for investors to get excited about.
Travel and Fintech go hand in hand
The banking industry has long known about the benefits of working with the tourism industry. For example, JP Morgan has recently announced that it is building a huge travel agency, and Neobank Revolut is now selling travel accommodation.
Because travel customers are now extremely interested in the high quality and convenience aspects of travel, there are even more ways banks, travel agencies and airlines can coordinate to create a better travel experience.
If the finance and travel industry could enter into an advance agreement on price agreements, booking flexibility and bonus benefits for customers, this could not only streamline existing services, but increase the overall quality of travel, especially since specialized travel companies have in-depth knowledge of the market.
The collaboration between travel and fintech companies can add a little to the agreed prices to ensure risks for things like canceled flights or other unforeseen circumstances. However, most customers are willing to pay a little extra for this service, so both the banking and tourism industries benefit. Sometimes it might not even cost the traveler extra, especially if they were a long-time customer.
There are already startups taking advantage of the travel-bank synergy
This new landscape has already seen several startups enter the scene. Some are brand new, and others have been around for a while and hope to secure more funding as the travel boom swells.
Valencia-based Flywire solves payment challenges for travel businesses by offering a one-stop shop to easily receive and manage payments, deliver invoices and statements, and collect commissions from various suppliers. Recently, a startup called WeTravel, which offers payments and other tools for the specific needs of group travel, raised $27 million. In addition to travel planning, the start-up handles various payment processes, such as partial payments, work with different currencies and payment methods, and payments to various suppliers.
The market is full of investment opportunities
Fintech trends such as open banking, “buy now, pay later” and tokenization also work in investors’ favor.
The ability to embed banking technology into the travel industry means that airlines, hotels and travel agencies are ready to invest in fintech products that offer high margins and easy LTV-enhancing add-ons.
The “buy now, pay later” trend is also very encouraging for the travel market. Flexible, readily available credit frees travelers to make higher value purchases or say yes to upsells.
Many companies have already taken the chance that the BNPL trend provides. Some of the most popular providers of this option for certain travel partners are Afterpay, Affirm, Klarna and Uplift. Affirm has partnerships with Delta Vacations, Priceline, StubHub and Alternative Airlines, a flight booking website. Uplift is focused exclusively on providing travel point-of-sale loans, with around 200 travel partners including United Airlines, Kayak, Southwest Airlines and Royal Caribbean.
Qantas launched a “fly now, pay later” partnership with BNPL supplier Zip, which enables customers to book domestic and international flights with payment installments that can also earn them Qantas loyalty points through Zip’s own loyalty program, Zip Rewards.
The BNPL trend provides a great opportunity for companies’ further development. Investors who can get into travel companies that prioritize responsible lending strategies are likely to see success.
Finally, the post-pandemic world expects frictionless payment for everything. Fintech companies that can offer simple payment solutions such as tokenization, last-mile digitization and merchant-initiated transactions have enormous growth potential in the foreseeable future.
The confluence of fintech and travel means optimal investment conditions
With the post-pandemic travel boom continuing to grow, the travel sector and all associated industries are working overtime to manage demands and provide the level of travel experience that customers now demand.
Rising demands plus an increasing convergence of fintech and travel means an unprecedented number of innovations are on the horizon, so now is the perfect time for investors to start looking at the emerging businesses coming to serve the needs of returning travelers.
