Guest Post: We need a payments system that works for everyone in travel

Modulr’s Agustin Fiori says the pandemic has shown how last-minute cancellations and changes require processes that protect suppliers, OTAs and customers

Agustin Fiori, European sales director at Modulr , says the pandemic has shown how last-minute cancellations and changes require processes that protect suppliers, OTAs and customers

When people talk about refunds, they’re usually talking about them from a customer point of view. And don’t get us wrong, that’s not a bad thing.

Making sure the processes work for, and are centred around, customers is one of the most important considerations.

But there are other parts of the journey, and other parties, that are affected by refunds.

When a customer is refunded by a travel agent, the money has already been put into the system and usually already passed on to suppliers like airlines and hotels.

Because they’ve pre-sold their seats or rooms, that means these are empty until they get resold.

The less time there is left until the booking date, the more difficult it can be for them to sell those on – potentially leaving them empty and denying the vendor that income.

The pandemic has exacerbated issues with this already problematic process.

As we all get more comfortable with travelling again, the rise in flexible working and online alternatives to meetings in other countries means that there may be fewer people travelling often.

Suddenly, the effort involved in making sure they find the best deal becomes worth it, meaning that customers may be more likely to shop around than ever before.

This has given rise to tensions around the process itself.

After all, if an OTA’s first priority is the customer’s money, suppliers may feel unfairly treated, or at least like they’d be better placed to deal with customers directly.

This competition between OTAs and suppliers may benefit the customer, but it can be to the detriment of both the OTAs and suppliers themselves, driving prices and loyalty downwards.

This has led to some suppliers building in loyalty programmes, offering points or similar as a reward for customers coming directly to them. The key point is trying to make sure they keep coming back.

Post-pandemic behaviour has further complicated things as many people have opted for quieter, more rural destinations, where large chains have less of a presence.

But even more than that, we’ve all become more open to the idea of plans changing.

This, in practice, either means sudden cancellations or bookings made closer to the last minute, and OTAs have become much more likely to offer refunds closer to travel as well.

The last-minute trend has positives and negatives for suppliers.

Being able to use rooms that would otherwise be empty is obviously a positive, but it’s a fairly wide-scale change in behaviour adding an urgency to payments and booking arrangements that may have been more leisurely in the past.

As a result, payment systems need to be able to efficiently handle large payments.

After all, it’s not just weekend breaks we’re talking about here. We’re also talking about much more expensive trips.

And not everywhere is equipped to handle that with a fast turnaround. Which means that not everywhere can offer the optimum bookings.

What sometimes happens is that the customer has to arrange payment in a way that takes longer to clear, like CHAPS (Clearing House Automated Payment System).

This means the booking isn’t secure, as the vendor may not be willing to confirm it until the funds have cleared.

And, without instant notifications, that relies on the supplier checking in a timely manner as well.

Some get around this with deposits, but that can mean less spending money for the traveller , especially if they have to wait for it to be refunded.

These are the kind of challenges that can only be smoothed over with efficient payment processes.

Open Banking and Payment Initiation with instant notifications can make an enormous difference to suppliers going direct to the market.

And the ability to generate unique virtual cards for each booking makes it easier for OTAs to track and reverse payments if necessary.

The key to all of this is for payments processes to be fast, transparent and easy to reconcile. This is not just good for customers, it’s vital for suppliers to stay in business in a changing landscape.

That said, suppliers like airlines, cruise lines and hotels have stepped up in a major way over the pandemic.

We’ve seen higher sanitation requirements than ever before in the name of passenger safety and comfort, companies reaching out to help transport medication and supplies, and hotels being used as accommodation for the vulnerable or even temporary hospitals.

This was a great illustration that the travel industry is at its best when it works for everyone.

In the same way a payments solution that works only for customers, that leaves suppliers behind at a vulnerable time, isn’t sustainable in the long run.

Instead, processes that work to compensate customers quickly, but also afford hotels, airlines and cruise lines the flexibility to deal with last-minute bookings and changes, is the clear way forward.

Modulr will be speaking at this year’s Travolution European Summit on May 4 as well as hosting one-to-one meetings with delegates about its payments solutions built for the travel industry. Tell us you’d like to attend the Summit by clicking here.