Innovation in the way we pay for goods and services has been constantly accelerating with over 5,000 new ‘FinTech’ firms created globally between 2008-2016, attracting more than $60 Billion of venture capital investment. This has driven innovations ranging from contactless payments and cryptographically secure digital currencies to instant payments. New research from PYMNTS suggests that now the travel industry is eager to take payments to the next level.
The new study, which conducted 78 interviews with payments managers from hotels, airlines and travel intermediaries, highlights a growing appetite to innovate in payments. Over 95% of interviewed companies plan to introduce new payments innovations in the near future, with over 14% planning a ‘lot of new innovations’. Factors such as meeting customer needs were cited as driving innovation, with the continued focus on delivering a more personalized customer experience an important payments objective.
Despite this bright prospect travel payments managers’ highlighted significant complexity as a key barrier to innovation today, with 85% of companies confirming an increase in the number of accepted payment methods over the last five years. The average number of methods accepted by respondents is nine, with companies having added an average of three new methods over the past several years. Similarly, the vast majority of travel companies (over 80%) work with between 3-10 different suppliers of payments services, increasing operational complexity still further.
Bart Tompkins, Managing Director, Payments, Amadeus commented: “The travel industry is standing at a tipping point in payments innovation. The next few years are a real chance for the industry to improve the customer experience and to manage costs through innovation with a host of advances in FinTech. Our advice to those companies looking to innovate in payments is to take a strategic approach: define what is a core competitive advantage and what should be outsourced. Then, when evaluating future innovations, focus only on those which improve customer experience, address complexity, or reduce direct or indirect costs.”
Tompkins added: “The travel industry is more international than any other, requiring payment methods that cater to a global customer base and a host of government regulations that must be managed.” He continued: “Despite these challenges, it’s clear the promise of delivering a more personalized experience is causing the industry to look again at how payments can deliver a competitive advantage.”
The study also found that travel firms spend on average 5.3% of their revenue on managing payments, including acquiring fees, fees to all providers and other indirect costs. That equates to a colossal $74.5B across the industry as a whole. Smaller firms pay disproportionately high fees, with those earning under $15M averaging 7.5% of revenue. This compares to just 3.8% for travel firms generating $1B+ in annual revenue.
The research was conducted by respected information portal PYMNTS in the first half of 2018. Telephone interviews were conducted with 78 payments managers from airlines (9), Hotels (41) and Travel intermediaries (28). Respondents were drawn from organizations of varying size with over 60% of firms generating $100m in annual revenue. The research was commissioned by Amadeus Payments which processes over $117B in payments annually for 1,000+ travel companies.
Research available at http://www.amadeusresearch.com/
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