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Travel Payment Trends to 2020

The travel industry was at the vanguard of internet 1.0. The digital economy’s natural distrust of intermediaries will mean a new round of disruption for the industry in the years ahead that is already causing a few bumps. Here’s our flight plan of some of the key trends in travel payments to watch out for through to 2020.

The rise of robo-travel?
No, this isn’t the rise of artificial intelligence to the point of replacing us humans finally tiring of sitting in ever-smaller airline seats. Think instead of the kind of robot automation introduced by Nissan into car manufacturing in the late 1980s, and how technology optimised the production line to make it more efficient. Only, instead of the production line think of the payment transaction value chain. The advance of digital, consumer expectations for ever-lower costs, and the pressure on profits across the travel industry, accelerated by the shift to real-time payments, will drive greater integration between payments providers, enterprise accounting systems and travel distributors. Travel booking is about to get a lot less manual.

Flying backwards
The digital economy is forcing companies everywhere to reverse engineer their businesses starting with the customer’s point of view. What started with the Internet making it easier to buy books, flights, and then music, at the turn of the century has now spread across the payment ecosystem. While online travel agents were at the vanguard of travel’s new wave, the efficiencies of the digital economy, together with the potential for further cost savings, and the negligible marginal cost of product improvement is forcing companies to meet new customer demands for payment convenience and flexibility. For the travel industry this might mean paying in instalments, through social media points (like KLM the first airline to adopt social payments in 2014), and greater acceptance of new forms of payment and booking.

The experience is the thing
A combination of margin pressure and rising consumer expectations from digital services will turbo-charge efforts by travel agencies to become more than agnostic intermediaries. That means having to ‘own the trip’ by putting together ever more elements such as local activities. Hosting site Airbnb has already added Experiences to its product category in key locations, while other OTAs are employing virtual reality capabilities to deepen their connection with customers. Increasingly, the shift means that more travel agents will need to think like merchants rather than mere agents – collecting money from consumers and paying multiple suppliers, potentially in different jurisdictions and at different time points. A whole new level of payment, not to mention technological, complexity for travel agents.

See through payments
Regulatory demand for transparency in payments will drive end-user choice but will also contribute to the urge to merge and consolidation among OTAs, and the potential for convergence of payments processing among airlines. The re-drafting of Resolution 890 by airline industry body IATA will force greater transparency of payment transactions costs of payment transactions not to mention the potential for airlines to demand better terms or use a different payment service.

Sell, sell, sell! (and then sell some more)
The atomisation of the airline seat into different components – priority boarding, seat selection and so on – powered the success of the low-cost airlines. If you thought that was revolutionary, you ain’t seen nothing yet. Greater control of payments and processing by airlines is likely to force them to offer more paid-for products and services, including more creative opportunities for merchandising. That pay-as-you-fly toilet might not be as unlikely as you’d hoped.