Friday, August 12, 2022

Digital Payments to lead the way for travel and tourism rebound

After over two years of the pandemic chaos, travel is back and continuing to grow by more than $8.6 trillion in 2022 alone. It’s impact on air travel, from a global perspective, has been varied. While domestic flights have outperformed in many markets, unhindered by the various variants; inconsistent policies regarding entry restrictions and quarantine requirements have taken a toll on intra-regional air travel in other markets.

What has remained consistent is travelers will to travel again.

Despite crowded airports, struggle with visas, flight cancellations, high flight costs and increase in COVID infections, the need for travel is real.  Amid this, suppliers are looking to ensure payments remain seamless and preferably digital as they ensure more flexibility, control and convenience over the way they manage their money and experience. 

A recent report by VISA titled, ‘Redefining travel payments  in the Post-Covid era’ charts how travel companies are using digital innovations to respond to the crisis and highlights best practices for travel merchants in the post-pandemic era.

Among them it was noted that travelers currently want to book at the last minute – a shift that has increased post pandemic as this practice would have been penalized by airlines, in a pre-pandemic environment. Flexibility is everything and customers need the guarantee of not being stranded or liable for additional costs if something unexpected takes place.

As a result, consumers are increasingly paying on credit cards that offer travel insurance and options for chargebacks. Contactless cards and wallets are other options that ensure safety throughout the duration of their travel.

Even mobile companies are jumping on the bandwagon with as they realize the rising demand for online payment options. Recently, Mobily Pay, a fully owned subsidiary of Etihad Etisalat Co., signed a deal with Visa to unveil enhanced digital payment solutions in Saudi Arabia. The new deal will allow Mobily Pay’s consumers to use Visa’s worldwide network, offering a more secure payment process.

As a result, it is now clear the pandemic has accelerated an evolution of digital channels that was already underway. Looking ahead, digital payments technology and tools are constantly evolving to help the travel industry take advantage of this shift in digital payment trends. Some of the common trends that promise to go Big in 2022 are:

Going contact-less : Covid has definitely made contact-less payments, be it using chip-enabled cards, QR codes or digital wallets, the preferred option for many.  Contact-less payments have seen widespread popularity worldwide with more than 50 per cent penetration of contactless payments in 70 countries.

While the biggest driver has been the ease, the biggest stumbling block remains people’s fear of payment. But pandemic or not, this growth will continue to remain. Contact-less payments which refers to both, contact-less cards which uses a Cardholder Verification Limit (CVM) and e-wallets are gaining popularity worldwide. In the US alone, 58 per cent of the population are now more likely to use contactless payment methods than they were before the pandemic.

Going Biometric : Biometric authentication promises to be an emerging trend in 2022. Biometric authentication is a verification method which involves fingerprinting scanners, facial recognition, iris recognition, heartbeat analysis, and vein mapping.

Travel involves a lot of moving across borders and so travelers are seeking an assurance that their transactions are secure and protected, while also having a speedy authorization process. Biometric authentication can become a reliable and secure option for those making digital payments. Besides safety, it provides accuracy and efficiency, all of which will in-turn build customer loyalty and trust.

Offering Mobile Point of Sale : Mobile-point-of-sale (mPOS) will mark a revolutionary change in digital payments as its technology frees travel merchants from having to be physically present. It allows them to go be present in various locations and continue to seamlessly accept payments from their customers.

MPOS (mobile point of sale) uses a portable smartphone or tablet that functions as a register for taking payments. The rise of in-app payments from like Google Pay or  Apple Pay and the use of innovative technology such as blockchain in travel, which were all becoming increasingly common in the run-up to the pandemic, has strengthened its popularity.  mPOS is for customers who simply want to tap their phone and go.

Better cash flow : The new digital payment technologies, while beneficial to the customer experience, is also opening more opportunities for businesses to get a handle on and improve their overall cash flow and revenue. Businesses now use options like installments to make travel more accessible and drive conversions.

Travel merchants are also leveraging new payment features to address evolving customer behaviour while limiting risk for airlines and travel agents. Once such feature is the ‘hold my fare’, that enables customers to hold the price for a specific period of time (typically a few days) either free of charge or with a small fee thereby protecting cashflow while keeping costs down.

More such initiatives are on the cards to support their post-pandemic growth, including automating processes for refunds and chargebacks, reassuring customers with new payment features and adapting fraud prevention with enhanced tools – all of which rely on digital payments.

Growth in Fintech : Fintech opportunities are on the rise for travel businesses. Over the years, they have successfully offered highly valuable and top-notch user friendly services to users, resulting in increased collaborations between FinTech enterprises and global banks.

Fintech integrates technology into financial service providers’ offerings to improve their customer service delivery. Larger travel agencies, airlines, and hotels are already present in this space with products such as mobile payments to alternative finance, online banking to big data, and overall financial management, and they continue to grow their offerings which will significantly boost revenue for businesses. Embedded finance providers make this trend possible through virtual products while travel companies can incorporate and make use of these products without becoming regulated entities themselves.

Digital payments are the future and digital innovation has long been central to the evolution of payments in travel. As payments methods continue transitioning from physical cash to the digital payment methods, many new trends are are likely to appear and disappear. Embracing it today is essential in a marketplace that is more competitive than ever as they play a vital role in shaping our future payment methods.

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