From the launch of the first charge card in 1934 to make it easier for customers to buy flight tickets, via traveller cheques and prepaid travel cards, to the online revolution at the turn of the millennium that saw the rise of online travel agencies.
 
As the digital era opens previously unreachable pockets of supply and services in the form of Airbnb, Uber, or MasterCard’s Qkr order-and-pay-at-table app, the travel market is once again on the verge of a new wave of disruption. An explosion in travel choice and customer demands for a simpler, ideally seamless, buying experience that introduces more personalisation and makes deeper use of automation, have opened the gate to further innovations and the promise of a yet-larger overall market.

The trajectory, and the incentive to innovate, are easy to spot. According to Celia Pereiro, head of travel payments at Amadeus, the travel industry spent around €72 billion on travel technology in 2015 in a market where tourism revenues account to $1.6 trillion, according to statista.com.

"Despite a glossy appearance front-of-house, the back-office of many travel companies, airlines or booking agents is often more Pan Am than App Store"

The opportunities to innovate as the digital travel age takes hold are many. Whether to enable customers to pay for additional services on their flight as they arrive at the airport, pay and book onward travel for when they arrive at their destination with the same travel app, or improvements in online booking engines to facilitate booking holidays, multi-stop flights, or for paying in instalments. 

According to Tony Barker, chief executive of global merchandising distribution system Paxport, “the next phase [in travel] will see more personalisation - travel must be more experiential, be more predictive and look at the whole journey”.

Spaghetti junction

This will also mean that travel services don’t start and end with a one-off booking, “personalisation is not just about offering a service that someone wants, but offering it in the way they want to receive it – and when they want it. Travellers expect to be seen as individuals, and want to receive information and offers built on their preferences and they want it delivered in a timely manner to their device of choice,” adds Pereiro.

"The industry is currently a bag of spaghetti: different models, different understandings. OTAs are often trying to be tour operators and vice versa"

The reality is more complex than it appears. Despite a glossy appearance front-of-house, the back-office of many travel companies, airlines or booking agents is often more Pan Am than App Store. Time consuming reconciliations, slow settlement and clearing and limited use of alternative payment channels are commonplace, meaning the focus is often more on maintaining cash flow than improving the service. The failure in February of India’s homestay site Stayzilla is a case in point – success in digital travel requires deft management of cash flows and a lean, efficient back office, as much if not more than high booking volumes at the front end.  

In Barker’s words, “the industry is currently a bag of spaghetti: different models, different understandings. OTAs are often trying to be tour operators and vice versa – not to mention different payment profiles depending on whether you’re an agent, tour operator, budget airline or national carrier”. 
 
For Paxport, part of the answer lies in a more collaborative approach between the different players in an increasingly complex travel ecosystem. “When it comes to selling ancillaries we want all parties to benefit – we have to be motivated through sharing the cake - splitting payments and then distributing commission or payment to the different parties. To help with that, we’re also working with some fintech companies to create more options for instant payment,” Barker says.
 
It’s an approach that differs dramatically from a decade ago when commissions from credit card payments for online bookings accounted for a growing percentage of agency takings - an unintended consequence of the early days of online travel. 
 
Today, as with other industries, like banking, the focus has shifted to improving automation and using technology to reduce distance between sellers and potential customers. While this may mean squeezing prices as competition intensifies, as early digital pioneers like Uber and Airbnb have shown, opening the market to innovation can also lead to suppliers sharing a larger market overall. 

Closing the last mile
There’s still a long way to go. Closing the last mile will be partly up to travel technology and payment providers to educate the industry about the importance of a joined-up approach that helps match the cash flows and costs involved with selling travel services on the supply side and paying suppliers on the buy-side. As Filip Filipov, head of business to business at travel aggregator Skyscanner, says, “If your site is not mobile optimised and uses iframes via a pop up window to take a payment, the experience is painful. Basically, if you’re treating payments solutions as just another thing you have to buy you’re probably getting it wrong.”

In an industry where razor-thin margins get tighter by the year and competition is relentless, ignoring opportunities for even small efficiency savings eats rapidly into profitability. More significantly, relying on old economy payment methods may also impede future growth, as Pereiro reflects, “payment is part of the travel experience – with many different touch points – a customer might initiate a booking on their mobile but complete it online or in the call centre. Suppliers need to integrate payments seamlessly to meet that expectation.” 

While real-time payment is still some way off, virtual card solutions such as the Amadeus B2B Wallet Prepaid , powered by Ixaris technology, that can integrate directly with a merchant’s site, can ease some of the pain by enabling faster clearing and settlement and helping to reduce card fees by making sure the best card gets used for the transaction. 

Looking ahead

It’s a view shared by Filipov: “[With Apple], once you’ve put in your card to make a song purchase – it’s so seamless it’s part of their success. In the case of BYO Jet and Dina Travel in Asia they had a more than 3000% uplift in bookings – admittedly from a low base – simply because customers could complete transactions with them directly.”

Seamless integration of the transaction flow to ensure payment reaches the travel supplier instantly at the point of booking might be closer than we think however. The advance of technologies such as blockchain, enabling the potential for secure transactions and authentication at minimal cost, could change that. “Blockchain could make transactions more transparent, and help prevent fraud with its open viewable ledger,” says Pereiro. 

The impact would be dramatic, benefiting both customers and the travel industry as a whole. As Dave Robinson, business development manager at Paxport, says: “with the emergence of peer-to-peer payments, instant transfer capabilities and the trend in APIs, you could say to tour operators that suppliers won’t incur fees”.

In the world of digital travel, closing the last mile might just mean the spaghetti gets unravelled.

Alex Mifsud is chief executive at Ixaris Technologies