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Navigating the new normal
Future of money
Security
Sustainability
Economic insights
Visa views

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January 2021

 

3 - 4 Minutes

How can digital payments help travel rebound?

The COVID-19 pandemic has hit few industries harder than international travel.

New restrictions on movement and subdued confidence among travellers suppressed global international tourist arrivals by 72% between January and October 2020, according to the UN World Tourism Organization (UNWTO)1. That represents 900 million fewer international tourist arrivals compared to the same period in 2019.

As the virus has ebbed, flowed and resurged in different parts of the world, its impact on air travel has also varied. Domestic flights have outperformed, unhindered by the complexity of differing virus containment strategies, and arrivals in China, for example, have already surpassed pre-pandemic levels.2 In Europe, consistent alterations in quarantine requirements have put the intra-regional air travel market further behind in the recovery, and the UNWTO doesn’t expect the rebound in European tourism to begin meaningfully until the third quarter of 2021.

Battling to survive

As the pandemic’s impact on the industry unfolded, two immediate concerns came to light: cashflow and fraud. The industry battled to maintain cashflows amid a surge in requests for refunds. Airlines sought to mitigate that pressure by introducing voucher schemes enabling customers to book flights in the future. In some instances, airlines and travel agents took a long time to process the high volume of customer refunds.

Fraud remains a problem despite the decline in sales, and common types of fraud have picked up alongside entirely new challenges, including instances of ‘double dipping’ by some customers who both requested a refund and initiated a chargeback for the same transaction. Furthermore, travel merchants in the EEA & UK will need to ensure online transactions can be processed in a way that is compliant with Strong Customer Authentication regulatory requirements. This will have various implications depending on whether the payment is on their own digital channel or through an intermediary or third party.

“We believe it is essential for merchants in the travel space to plan ahead and prepare for the new normal, adapting to new customer expectations and behaviour. We believe this guide will help travel merchants identify relevant solutions related to payments in order to support their recovery.”

Yuval Ziv – Managing Director of Digital Payments at Nuvei

 

“Payment is a key lever to support online travel agents’ and airlines’ priorities related to cash-flow preservation and revenue generation. Adapting to this new era will require merchants to leverage industry best practices and have a clear payment strategy, which we hope this white paper will help define.”

Pascal Burg – Director at Edgar, Dunn & Company

Flexibility becomes top priority

All of this is taking place amid an unprecedented shift in customer behaviour and expectations. Many of these are linked to digital payments and can be leveraged as a revenue driver by airlines and travel agents during the recovery. This is one of the main findings of a new report produced by Nuvei and Edgar, Dunn & Company (EDC), with participation from Visa.

The report, ‘Redefining travel payments in the post-COVID-19 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.

For example, many travellers currently want to book at the last minute – that is one of the primary behavioural shifts initiated by the pandemic. This practice would be penalised by pre-pandemic pricing strategies and airlines are adjusting as a result.

The report highlights that flexibility is now a top priority, and customers want peace of mind that they won’t be left 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. Naturally, health and wellbeing has become a central focus, which is likely to grow further as health checks become more common at airports. Travellers are increasingly using contactless cards and wallets as an additional safety measure throughout the duration of their holiday.

These changes are fuelling digital innovation, which has long played a key role in the evolution of the travel payment sector. The rise of in-app payments (e.g. Apple Pay), increasing usage of wallets by travellers (e.g. AliPay) and the use of innovative technology such as blockchain in travel were all becoming increasingly common in the run-up to the pandemic. It is now clear the pandemic has accelerated an evolution of digital channels that was already underway.

 

A digital-first experience

In fact, almost three in four respondents to the report are currently implementing changes in their organizations in order to respond to customers’ need for a digital-first experience. New technologies such as contactless, QR codes and digital wallets are becoming increasingly popular and some airlines, Air Asia for example, are implementing contactless services at airports including kiosks, contactless payment options and other features on mobile apps.

Travel merchants are also leveraging new payment features in order to address evolving customer behaviour while limiting risk for airlines and travel agents.

New features include options for instalment payments that enable travellers to divide the value of their booking into smaller payments over a fixed period of time. Merchants are also implementing a ‘hold my fare’ feature 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.

Responding to concerns that obtaining refunds can be complicated and time consuming, merchants are increasingly using escrow accounts that charge travellers at the time of booking, with the money stored there until the day of travel. Merchants are alleviating similar concerns via virtual cards, which offer protection against travel provider bankruptcy. Subscriptions are also increasingly popular. Air Canada, for example, offers unlimited travel domestically over a one to three-month period when an Infinite Canada Flight Pass is purchased.

The roadmap to recovery

Together, these measures can enable airlines and travel agents to protect cashflow while keeping cost down, both of which are likely to be the key priorities for the travel industry as the roll-out of vaccines progresses and the recovery draws nearer.

In addition, travel merchants say they intend to progress a number of key initiatives 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.

As a result, it looks likely that the acute uncertainty that brought airlines and travel agents to the brink will in fact spur positive change, as the industry harnesses digital channels to put customer service at the centre of its path to recovery.

The future of travel and payments

The following trends have been identified in the Redefining travel payments in the post-COVID-19 era report

  • Flexible with customers wanting to book last minute and use options like instalments and subscriptions
  • Secure with additional anti-fraud measures, escrow accounts to handle future refunds
  • Contactless as both a safety and convenience measure
  • Digital with the increased use of digital wallets, blockchain and further automation of refunds and chargebacks

Click the following link to download the report, ‘Redefining travel payments in the post-COVID-19 era’.

1 Impact assessment of the COVID-19 outbreak on international tourism, UNWTO, December, https://www.unwto.org/impact-assessment-of-the-covid-19-outbreak-on-international-tourism

2 China’s domestic flights recover to pre-Covid-19 levels, Argus Media, September, https://www.argusmedia.com/en/news/2138209-chinas-domestic-flights-recover-to-precovid19-levels

 

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