The travel payment landscape is evolving at a rapid pace and new names are popping up all over the place. Sally White dips a toe in to find out where the money is.
Disruption in travel is a familiar story, but right now it is the back not the front office that is the scene of the action. A tech revolution in the all-important money side of the business is growing apace and challenging the banks’ dominance. Wherever you look at the handling of payment, it is undergoing change.
Payments is mega! The latest of McKinsey’s Global Digital Payments Map, published last year, put the total in 2017 at $1.9 trillion, a figure which is forecast to reach $3 trillion in five years. A joint study by US payments news website PYMNTS.COM and Amadeus, while not assessing any figure for travel’s share of that, said 5.4% of global travel sales goes towards paying third-party payment service providers.
5.4% of global travel sales goes towards paying third-party payment service providers
The study commented that the global travel industry is only now making the “first cautious steps into its own payment revolution.” Yet there seems to be no shortage of action!
A run through the site of The Paypers, a Dutch-based news site for the global payment community, has announcements of new services and technology on almost a daily basis. The names show how far from the financial mainstream this sector of travel is growing and how many new firms are emerging. For example, Indian software group Newgen has just announced that it has integrated Wirecard, Secure Trading, Checkout, Trustly, Novelnet, Interac, Paysafe, Creditsafe, PPRO, and Sepa Express to their payment gateway solution.
The Paypers has published, too, a magnum opus on the subject – The Payments and Commerce Market Guide 2018-2019 featuring the most discussed trends in the global payments and commerce industry, together with mappings on the key market players.
Apple, Ctrip and IATA et al
The latest news includes Apple’s plan to launch its own card this summer using US bankers Goldman Sachs and MasterCard. Apple is hoping to attract iPhone users with a daily cash-back offer and some smart tools to help manage finances. Application, checking your transaction history and paying your bill all take place on an iPhone. The card exists virtually within Apple Wallet – if you’ve set up Apple Pay with any other bankcard, the Apple Card will also live there. If the point of sale doesn’t accept Apple Pay, Apple also offers a physical credit card made of titanium. Since this is right in their backyard, the big banks will certainly come out fighting.
Not everyone is impressed. For example, US tech magazine Wired is not sure how revolutionary Apple is really being, commenting: “It’s worth noting that this isn’t Apple’s first rodeo. There have been several incarnations of an Apple credit card since at least the mid-80s. But there is something new about the Apple Card: it represents Cook’s boldest effort yet to increase the adoption of Apple Pay across the globe now that the allure of having a shiny new iPhone in your pocket has waned.”
In Asia, China’s No.1 travel agency Ctrip is launching its own Visa card through German-based processor and issuer Wirecard. There are new products and partnerships from UK-based Worldpay, which has a vast travel payment practice via its links with airlines, and has just agreed a merger with US financial service giant FIS (which values it at $35 billion). Worldpay has a new in-airport payment system (allowing payments at the check-in desk) developed with Amadeus. Oh yes, and it has also just announced a partnership with Amazon!
The International Air Transport Association has been testing ‘IATA Pay’, which uses technology from the UK’s ipagoo, a nonbank payment service provider, to cheap and secure ticket purchase directly from airline websites. Affirm.com is enabling travellers using Expedia, AlternativeAirlines.com and many smaller firms, to pay by instalment.
Elsewhere, in response to the preferences of Japan’s rising number of Chinese tourists, Yahoo Japan is matching the QR-code-based platforms operated by China’s Ant Financial and WeChat/Weiin to offer a cash-less service. It is using technology from Paytm, India’s largest payment service, which also happens to be backed by Ant Financial. And so it goes on….
Bank attack
On the corporate side, driven by the quest for data (and of course, for every decimal point to add to the margins) most major names have already partnered with the major card groups and banks to create their own cards, the US hotel groups and airlines especially. Hyatt, Hilton, Radisson and Marriott feature among the hotels, Southwest, United and Delta among the airlines!
Amsterdam-based Adyen is one challenger to the banks listed by McKinsey (others include Square and PayPal). Its global payment platform is enabling businesses to accept e-commerce and mobile payments and it partners a wide range of travel groups, from Cathay Pacific, to ride-hauling apps Grab and Taxify and destination activity booking platform Klook.
The banks are under heavy attack on their traditional territory, as McKinsey points out in in its report on The Digital Battle that Banks Must Win: “…, attackers are developing payments-service capabilities and operational skills superior to those of banks. They are not smarter, just more focused. Banks’ customer relationships, structural security, multichannel capabilities, and stability should ultimately combine to win the game.”
McKinsey adds: “While banks such as Danske Bank (with Mobilpay) or Barclays (Pingit) are reaching substantial new customer communities, it is nonbank attackers, ranging from large telecommunications companies to small and nimble technology players, that are defining the standards for digital banking.”Nonbank challengers are operationally built for continuous innovation, and frequently upgrade their arsenal!
One of IATA’s strategic objectives is to support airlines’ financial sustainability including controlling costs
The drivers are many – Aleksander Popovich, IATA’s Senior Vice President of Financial and Distribution Services, named several at a press conference: “Today’s consumers, and especially millennials, have expectations of multiple payment options including mobile and peer-to-peer. IATA Pay responds to these expectations. At the same time, airlines are trying to manage significant card payment costs – $8 billion per year and rising. A large part of this cost is incurred in direct purchases from airline websites. One of IATA’s strategic objectives is to support airlines’ financial sustainability including controlling costs.” Pilot airlines include Cathay Pacific Airways, Scandinavian Airlines and Emirates.
Others want to widen their customer appeal. Some of the fintech start-ups — for example, Affirm, Airfordable, and UpLift — are pitching services offering delayed payment for travel. These are definitely competitors to the banks. Affirm is the creation of Max Levchin, a US serial entrepreneur who co-founded PayPal in 2002, so he already had form in the sector! Uplift, also US-based, raised $123 million from private equity groups in January to expand its reach.
Asia is the source of many of the new finance apps pushing their way onto the travel scene. While it does not cut out the conventional providers, TakeMePay is a brand new payment platform rolled out by Japanese restaurant search and discovery app Japan Foodie. This lets restaurants, retailers, railways, attractions, and tour operators accept multiple payment networks with the same process, including Alipay, WeChat Pay, Visa, MasterCard, Apple Pay, Line Pay, Rakuten, and so forth.
What many travel brands, especially Asian ones, want from their payment enablers is the ability to make digital payments and to use mobile payment wallets. Wirecard, which has linked with Ctrip but is actually not Asia-based but HQ-ed in Bavaria, has recently announced the release of its Virtual Express solution providing access to digital funds, designed specifically for mobile wallets. Meanwhile, its competitors – such as Stripe Connect and Venmo for Business, are also expanding fast.
So, banks or tech companies, who will dominate the payments market? As McKinsey say, the banks must move quickly to keep their territory and will succeed only “if they can match the solutions, operational efficiency, and client-service skills of attacker….as in the digital world, tomorrow is already too late”.
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