How Fintech is changing the travel and hospitality industry

Travel spending shows signs of recovery after the pandemic. However, lifestyle changes will continue to influence industry trends, especially when it comes to online payments.

The travel and hospitality industry experienced an unprecedented crisis during the COVID-19 pandemic. Entire customer bases disappeared, and many experienced employees were forced to find alternative work. With the hospitality sector now largely back in business, operators are still feeling the pressure – not only from reduced capacity, but also from customers who are now accustomed to using the latest digital payment methods to pay for goods and services online.

According to ECOMMPAY’s survey data (in partnership with Censuswide), almost a quarter of UK consumers (22%) believe the travel industry could offer better or improved payment services – such as options to pay a deposit or request a refund. The hospitality sector is in a similar situation, where 17% of the participants in the survey see the potential for better payment services. In this article, we highlight some of the latest fintech payment trends and the benefits they offer the industry.

Changing trends for consumer payments

Until about ten years ago, the only realistic option was to pay for travel or hospitality services by bank or credit card. As post-COVID-19 itineraries become more complex (and more expensive) and demographics slowly shift, the industry is beginning to embrace more modern payment methods, including Google Pay and Apple Pay. These payment technologies provide a better experience for customers who are used to tapping a smartphone screen to make all their online purchases.

“We now live in a time where there is a multitude of choices. We need to offer as many payment methods as possible to give customers the best experience and keep them engaged. I think people perceive a business to be progressive and forward thinking if they see more payment options. It’s an easy win and helps make your business look more modern.” — Marc Vincent, Chief Financial Officer, Newmarket Holidays.

So what are the latest payment trends gaining popularity in e-commerce and what benefits do they offer the travel industry? Here are some examples:

Open bank

Open Banking is both a technology and regulatory standard that aims to deliver control over banking data back to consumers, increasing both transparency and control. The protocol works across the EU and UK and allows users to securely transfer money between accounts and authorize online payments directly from a banking app or website.

Unlike card payments, Open Banking transactions have no intermediaries. In addition, compared to regular transfers that can take 3-5 days to complete, settlement using Open Banking takes place within seconds. The service enables a much smoother banking experience and offers significant benefits for travel and hospitality businesses:

• Improved payment conversion due to seamless, mobile-first payments without the need for manually entering card data.

• Better acceptance rates, with up to 95% successful transaction rates compared to an error rate of 5-14% with regular card payments.

• Up to 80% savings on fees compared to traditional card transactions.

• Zero chargebacks, protect travel agents from fraudulent transactions and hoteliers from no-shows.

• A more user-friendly payment experience for consumers, with improved security.

BNPL

Buy now, pay later allows customers to set up a flexible, short-term financing plan where the total purchase cost of a travel package or accommodation goes directly to the supplier, with installments collected by the BNPL scheme operator.

BNPL is rapidly gaining ground with UK consumers and is likely to be the fastest growing payment trend in 2022 – despite tighter government regulations on the horizon as we approach 2023.

According to an ECOMMPAY survey of travel and aviation industry representatives, Buy Now, Pay Later is growing in popularity as a travel payment method, with 94% of respondents noting an increase in usage since the easing of COVID-19 restrictions.

For travel operators, ATOL protection adds an extra layer of complexity to Buy Now Pay Later, which will require careful consideration, but should not stop businesses from considering this popular payment method.

What are the benefits of BNPL for travel and hospitality?

• BNPL offers a degree of financial protection, as payment is received immediately, allowing the BNPL scheme provider to collect installments.

• When a client pays with BNPL, it can be easier to upsell more expensive packages or upgraded accommodation. This means that merchants will often receive more money per client with BNPL than with alternative payment methods.

• Offering alternative payment methods gives customers greater choice, which can often help with conversion at checkout.

The benefits of multiple payment options

Last year, ECOMMPAY conducted extensive consumer and business research in partnership with Censuswide, which found that approximately 25% of customers would consider leaving a payment site if their preferred payment method was not offered. In addition, 80% of consumers ranked ease of payment and efficiency as hallmarks of a strong customer experience, so it is increasingly necessary to offer travel customers as many of the most popular payment methods as possible – including those local to their geographic region.

To conclude

As the industry evolves to accommodate a post-COVID clientele, it must take into account the permanent changes in the consumer landscape. Today, customers are more tech-savvy and eager to use different methods to pay and interact with their favorite brands. Therefore, it is up to travel companies to investigate the latest fintech solutions and add them to their offering to operate more fluidly ahead of the emerging market boom.