Large OTAs can save more than half of back office costs and almost double Ebitda by implementing blockchain technology, a leading developer has claimed
Speaking at Phocuswright Europe this week TripX chief executive Michael Culhane said the payments and billing cycle in travel can take up to three months to complete.
He said the level of back office costs incurred due to firms chasing up commissions and paying suppliers is three to four times higher than any other sector.
“There are huge problems associated with this. The entire process is entirely cumbersome. That’s what we are trying to fix,” he said.
TripX claims its blockchain-based system enables agents to pass on payments from customers or pay suppliers without the need for lengthy reconciliation.
It also allows commission payment to be made immediately helping agents to properly account for its income and building trust between supplier and intermediary.
The technology removes the need for intermediaries to operate and manage deposit accounts with supplies.
He said currently many agents do not believe they are being paid the right amount of commission because they forget what levels they have agreed for different products.
“The goal is to cut back office costs in your businesses by 50%, that’s the mission. What happens in this industry is you have this rather complex mix of intermediation.
“It’s always been a complete bafflement to me that we could not develop systems that could do this less manually.
“There are very important relationship issues that kind of get screwed up or strained in this process.
“What could be worse than agents you distribute through and they feel they are getting screwed over on their commissions but you know you are paying exactly what you should be?”
Culhane said TripX is not interested in B2C payments, an area that in the main works well, but in the inefficient and complex B2B payments sector.
And he said blockchain is now being considered as the solution. “People now understand why you’d want blockchain.
“We understand the power of this distributed ledger, the power of records that cannot be hacked.”
Culhane said TripX consolidates a seven-stage system to four removing the need to reconcile payments at the end of each month or employ a third party to chase commissions.
“A large OTA will save 50% to 60% of back office costs, and that will almost double EBITDA. The expenses we are pulling out of the system is profound.
“But you have other benefits of customers knowing what they have been paid in commissions and respecting you for doing the best job you can in getting them the lowest prices.”