Alternative payments now account for more than half (51 per cent) of e-commerce transactions for travel worldwide and there are now more than 300 ways to pay, according to a new report.
Research commissioned by Amadeus and PPRO for The Travel Payments Guide shows Asia is leading the charge on alternative ways to pay, such as e-wallets and bank transfers.
E-wallets are now twice as popular as cards in China, where Alipay and WeChat have grown to immense popularity. This form of payment now accounts for 49 per cent of the country’s US$155 billion digital travel spend.
While cards and cash are still king in North America, accounting for 62 per cent of travel spend, Amadeus says it believes e-wallets could replace cards as the most popular form of payment by 2025, having gained an additional 4 per cent share of the market in the last 12 months.
Speaking to BBT, Amadeus’ head of merchant services Jean-Christophe Lacour said the report shows the need for travel providers to get behind frictionless payments. He added: “It has been estimated that payment processes where there is friction costs American retailers a couple of hundred billion dollars a year, whether it’s because customers abandon the transaction if their payment doesn’t work the first time or they come back but then go elsewhere the next time they want to shop.
“There is a lot of effort happening in the industry to facilitate frictionless payments – Uber is a great example because travellers store their payment details with their account so they don’t even have to think about it at the end of their journey. It makes sense for merchants to get on board with this because it means they can focus on their service.”
The report focuses on leisure travel habits, but Lacour believes it’s important for TMCs and their clients to take notice because, as with most leisure trends, travellers will begin to expect a similar experience when booking business trips. “Generation Z customers are used to doing everything digitally and without friction, so they’re going to want that same process when they travel for business.”
Speaking from an agency perspective, Lacour said there’s “no reason” an online travel agent (OTA) that serves the business travel market wouldn’t want to offer the same payment methods used by consumers. “And we’re already seeing the cross-over; Uber now offers business accounts and even Airbnb now has its ‘for work’ division. So why wouldn’t TMCs and suppliers want to provide a similar frictionless payment process?
“Virtual cards are one way the corporate travel industry is moving into this space. Many providers now offer the ability for travellers to add a virtual card to their e-wallet, so they can continue using their digital wallet but the company still has visibility and control of their spend. Open banking also has its place in frictionless payments, allowing companies to facilitate real-time bank transfers to pay for goods and services.”
When asked if the payment space is becoming too fragmented with more than 300 methods available around the world, Lacour said: “I agree that there is a risk here, but ultimately a lot of these alternative types of payments develop locally to address a need. There is also some movement in the industry towards standardisation; Visa and Mastercard are driving Secure Remote Commerce (SRC) to standardise online checkouts around the world. At the moment, different methods have different checkout experiences, but SRC aims to simplify the payment button. For the business travel industry, it’s about simplifying the process while giving corporates the ability to control compliance and spend. Some may think the payments landscape is becoming more fragmented, but with the technology we have we can simplify it and deliver better value.
The report marks a new partnership between Amadeus and PPRO, a cross-border payment specialist. The integration of PPRO into the Amadeus Payment Platform means travel companies can accept a wide range of alternative, local payment methods such as real-time bank transfers, e-wallets and direct debits.
Lacour says the system also allows merchants to rapidly add and experiment with new methods without having to go through the lengthy process of forming relationships and signing contracts with individual payment providers. “So if they test something and there isn’t a lot of uptake from customers, they can simply switch it off and try a different method.”
Bart Tompkins, MD of payments at Amadeus, commented: “This data highlights how quickly the payments landscape is changing and the increasing complexity facing travel merchants. That’s why we’ve teamed up with PPRO, so travel companies can quickly test alternative methods balancing revenue, cost and customer experience considerations to meet the evolving needs of travellers. It should be noted that despite less travellers paying with cards directly, many e-wallets do rely on the card networks in the background. So, cards will continue to be essential payments infrastructure for our industry.”
James Booth, head of new business at PPRO, added: “Travel has always been at the forefront of e-commerce and our data shows it commands a significant share of the pie. Our collaboration with Amadeus forms part of our mission to help companies get paid in any way their customer chooses to make that payment. Some of the largest markets in the world are seeing alternative, local payments take more than 7 per cent market share in a single year, so travel merchants really do need to move quickly now.”
The partnership follows Amadeus’ integration with Barclaycard earlier this year and with Ypsilon last month.
Download the full Travel Payments Guidehere
amadeus.com; ppro.com