New era of payment innovation to improve experience and reduce costs

The travel industry is poised to enter a new era of payment innovation to improve the customer experience and reduce costs to the tune of $74.5 billion. A new study conducted by PYMNTS at the request of Amadeus shows that the travel industry is looking to drive innovation in payment methods to deliver a more personalized experience.

Innovation in the way we pay for products and services has progressed steadily. Thus, between 2008 and 2016, over 5,000 financial technology (FinTech) 

More than $60 billion in investment from venture capital firms was created worldwide. 

This momentum has led to innovations ranging from contactless payments and encrypted secure digital currencies to instantáneo payments. A new PYMNTS study suggests that the travel industry is now ready to take payments to the next level.

This new study, which involved 78 interviews with payment managers at hotels, airlines and travel intermediaries, highlights a growing willingness to innovate in payments. More than 95% of the companies surveyed plan to introduce payment innovations in the short term and more than 14% plan to undertake «many innovations».

Among the factors driving innovation, satisfying customer needs was mentioned, with an important objective being a constant emphasis on offering customers a more personalized payment experience.

Despite this positive outlook, travel industry payment managers highlighted complexity as a major obstacle to innovation today. In fact, 85% of companies confirmed an increase in the number of payment methods accepted over the past five years.

The average number of payment methods accepted by respondents is nine, and over the past few years companies have added an average of three new methods. Similarly, the vast majority of travel companies (more than 80%) work with between three and ten different payment service providers, which further adds to operational complexity.

The study also reveals that travel companies spend an average of 5.3% of their revenue on handling payments, which encompasses acquiring fees, commissions to all suppliers and other indirect costs. That's a staggering $74.5 billion for the industry as a whole.

Smaller companies pay disproportionately high commissions, with those with revenues of less than $15 million paying an average of 7.5% of their revenues. That contrasts with the mere 3.8% paid by travel companies with an annual turnover of more than $1 billion.

 

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