New tech offers all sorts of possibilities, says Amadeus payments managing director Bart Tompkins

In a global industry such as travel, the cost of moving people around the world is only one of many that travel companies must account for.

You might already be familiar with an uncomfortable statistic: travel companies are estimated to spend 5.4% of their revenue on direct and in-direct payment costs, accounting for about $74.5 billion across the industry.

I’m sure we all agree that figure is way too high and travel payments are ripe for innovation.

This year, the way travel companies process payments will become more important than ever.

Payments, rather than being merely an obscure back-office process, are tightly tied to a customer’s overall experience and memory of a trip.

In research, we found that millennials (a group which now outnumbers baby boomers) are more than twice as likely to ditch a shopping basket mid-purchase as older generations, showing the importance of an easy and frictionless payment experience – especially when further research revealed that 38% of respondents cited payment method choice as their number-one requirement when making a purchase.

There are so many new payment methods now available to consumers that traditional methods like cash are seeing a rapid decline.

In a global industry, airlines and travel sellers may want to consider offering customers the chance to pay with local or alternative methods such as WeChat and AliPay, which are no longer ‘nice to have’ but rather a necessity.

The key factor is ensuring that travellers have the choice, experience and flexibility they need, not just when booking online, but throughout the entire trip, including traditional pain-points like at the airport and increasingly for in-destination payments too.

Improved margins

The link between payments and profitability is increasingly strong.

For agencies, how you pay out to travel providers can improve margins by 30%, simply by optimising the payment method to make each booking and to access rebates intelligently.

Modern payment platforms are now able to automate this decision, based on the criteria that matters most – e.g. cost reduction, rebate or conversion rate.

For travel suppliers, what matters most is ensuring a high conversion rate and optimising the cost of accepting payments – both of which are difficult for large players with multiple payment-service providers in different geographies and complex payments set-ups.

This is a problem we’ve been thinking hard about, and it led to our Xchange Payment Platform which allows airlines to easily route payments based on specific criteria such as cost and acceptance rate.

We’ve seen this approach increase traveller payment acceptance rates by several percentage points for airlines, which translates into millions in additional revenue.

Closer partnerships

In B2B transactions, travel agency groups commonly try to maximise rebate rates by paying airlines with specific corporate cards that have high acceptance costs.

What the industry needs is a B2B payments channel that strikes the right balance between agency rebates and supplier acceptance costs, one that prioritises loyalty and helps airlines and agents to benefit simultaneously from the same one-payment transaction.

I recommend agencies get ahead of this trend and set up bespoke payment channels with their payment providers and as part of their overall interaction with key airline partners in order to lower the overall cost of payment.

The Partner Pay add-on to the Amadeus B2B Wallet illustrates how a payment solution can mutually benefit both airlines and travel agencies.

It can substantially reduce the overall cost of a B2B payment by allowing airlines to accept a virtual card with which partner agencies can pay them rather than use a legacy corporate card.

By using the available technology, companies involved in any transaction can foster loyalty while increasing margins.

Payments departments need to step out from the shadows. In 2020, payments can be a way for travel companies to address their strategic objectives – of customer experience, margins and relationships.