Travel Companies Grapple With Outdated Systems as Local Payment Methods Increase in Popularity | The Fintech Times

Outdated or complicated payment systems are harming a majority of travel companies’ profit margins; according to new research from global payments and financial platform, Airwallex, and travel research company, Skift.

Overall, around 66 per cent of travel companies are seeing profit impacted by payment systems, and nine in 10 plan to prioritise modernising their financial operations this year.

The new report reveals the travel industry is also being challenged by shifting payment preferences since the COVID-19 pandemic. While revenue from cross-border payments is on the rise, the diversity of payment methods in different markets complicates transactions for 70 per cent of travel companies.

Since the pandemic, 88 per cent of travel executives agree there has been a shift in how customers prefer to pay. In particular, local payment methods and peer-to-peer systems are rapidly gaining popularity, especially in Asia.

“As global travel continues to boom, travel companies increasingly rely on quick and seamless cross-border payments to surpass customer expectations at every touchpoint,” explained Jack Zhang, co-founder and CEO at Airwallex. “However, our latest study shows that slow and outdated payment processes are increasing the cost of moving money internationally, which is eating into their profits – modest at the best of times.

“Modernising their financial operations with a unified and scalable payment solution will be critical to reducing the cost and friction associated with managing cross-border transactions. For smaller players, this can be what levels the playing field, enabling them to compete with larger, more established counterparts.”

Opportunities for improvement

Although cross-border payments can bring about challenges, they remain hugely important for travel companies’ money-making. Overall, the report found that 75 per cent of travel companies earn more than one-quarter of their revenue from cross-border payments, while 88 per cent frequently make payments to suppliers or vendors in foreign currencies.

“Our survey of global travel executives uncovered new, unique and even surprising insights into why unified payment and financial systems are critical in meeting today’s traveller expectations,” says Rafat Ali, CEO and founder of Skift. “Amid an unprecedented rise in international tourism, the report intends to give travel companies a framework to expand their knowledge base and build more efficient, effective and profitable businesses through modernised payment and financial operations systems.”

Skift and Airwallex surveyed 473 travel executives in April 2024 across Australia, China, Hong Kong SAR, Israel, Singapore, the United Kingdom and the United States.

Sixty-seven per cent of executives agreed that cross-border payments have become more complicated due to the volatility of FX rates. Meanwhile, managing multiple supplier and vendor payments in different countries using existing payment and financial infrastructure and reconciling bookings, payments, commissions and refunds data emerged as a key challenge for over 50 per cent of executives.

Ninety per cent of travel executives are prioritising upgrades to payment and financial operations systems, while 80 per cent of executives revealed they would be interested in an all-in-one payment and financial operations platform.