Tom Kelly, sales director of payments tech firm Modulr says more firms are looking at payments as part of their strategy to adapt to change and protect themselves from disruption
Travolution Summit 2023: A payments revolution is coming – is travel ready?
There are times in each industry that you can feel change in the air. Like the calm before a storm, it’s clear that things are about to be disrupted.
And, at Modulr, that’s how we’re feeling when we look at the travel industry.
It’s not just that we want to disrupt how payments happen in travel – it’s that we think this is something that’s going to happen, so we want to make sure that it’s done well and creates opportunities for OTAs and technology providers to be innovative.
Why change is happening
We all know the challenges in the travel industry when it comes to payments, and this is without the challenges caused by the wider issues in travel over the last few years.
In 2019, airlines spent $20.3 billion, or about 2.2% of the total payment amount, just on payment acceptance costs. The largest component of these acceptance costs are card payment fees.
The rising cost hasn’t led to a fall in complexity, though. As OTAs have increasingly shifted to more of a merchant model, they’re handling a higher volume of payments and the reconciliation of these payments becomes more complex.
And the more complex the reconciliations, the more time and effort it takes for finance departments to manage.
And this has all happened at a time when OTAs are having to adapt how they approach payments anyway, due to the high speed of innovation in the sector and also the technological changes in payments themselves.
Customers are responding well to schemes like Buy Now, Pay Later (and some interest in Save Now, Buy Later), with 78% of UK businesses expecting BNPL to increase, and with closed loop payments and open banking starting to get some traction, it leads to the obvious question.
How do you future-proof payments?
We believe this is a time of change for payments, as a response to multiple drivers.
From the business side, we expect merchants and OTAs to work more closely to develop efficient and secure payment methods – these will likely be based on both card and account-to-account rails.
Meanwhile, on the customer side, we expect the adoption of alternative payment methods will rise, as consumers demand more flexible payment terms and methods.
And this is all against a background of the rise of travel fintechs, who are innovating across sectors from insurance to BNPL and blockchain.
This is why working with payment partners can help to build the flexibility that you need in the future.
Choosing a payments partner that can handle different B2B payment flows (like accounts, collections, pay-outs via cards and account-to-account) means that you have more options when it comes to adapting to new changes.
The more control you have over your payments, the more straightforward it’ll be to launch new payment products quickly if and when you need to.
Working with a payments partner
This can sound complicated to implement, but that’s why payments partners like Modulr exist.
While it used to be the case that only banks could offer these functionalities, the emergence of regulated e-money institutions that enable businesses to easily embed payments into their processes has been a game-changer.
A suite of pay-out products can give you flexibility when it comes to paying suppliers, and can actually mean improved acceptance, due to multiple card products and multiple interchange tiers, as well as offering bank transfers or closed loop payments.
Rather than working on all these individually, you can work with a payments partner that can grow with you as you expand, adding different modular components as they become more relevant to you.
Through a single API integration, a payments partner can offer a suite of payment services, meaning you don’t need to work with multiple partners for each payments solution.
This can bring cost and time saving measures in multiple ways – after all, the more partners you have, the more time your teams need to spend integrating them, reconciling between them, and managing them.
This means you don’t have to create your own solutions from scratch. Instead, you can allow your tech and product teams to focus on the things you want them to, like customer experience and booking systems.
Getting ahead of change
Change is necessary in any industry, but it often means disruption. For every Netflix, there’s a Blockbuster, after all.
Which is why we’re encouraging more organisations to start looking at payments as something they need a strategy for as they move forward.
We believe the type of benefits I’ve talked about here are ones that companies are already considering and exploring – after all, nobody wants to be playing catch-up when their competitors are already offering new options.
Modulr’s guides to embedded payments in travel is available to download now. It covers common challenges, showcases the payment products that can solve them and can help businesses to grow and expand their offering.