Until recently, the fintech revolution had mostly passed the travel industry by. While other industries moved quickly, and embraced the efficiencies that fintech can bring, the travel industry had been pretty happy with the status quo. But quietly, behind the scenes, change was happening and COVID has been the catalyst for the fintech travel revolution to take off.
Before COVID, travel was booming. In 1950, 25 million people took foreign trips each year. By 2019, that had increased to 1.5 billion. While competition was fierce, it was still a growing, highly profitable industry. Then along came COVID. Travel and tourism’s contribution to European GDP halved in a year.
Suddenly, revenue was down drastically, margins were being squeezed and travel companies had hard decisions to make. They needed to cut operating costs, but didn’t want to lose key staff – otherwise they wouldn’t be ready to bounce back quickly when the inevitable recovery came. For smart companies this meant trimming unnecessary expenses while at the same time increasing efficiencies and finding new ways of driving revenue. Fintech ticked all the boxes.
While COVID has accelerated change, it has also dramatically increased people’s receptiveness to change.
Think about our use of digital. Think of how many more digital interactions you have now than you did two years ago; how many more virtual calls and online transactions; how many more essential services (government, medical, banking) you access online and how often you work remotely instead of in the office. McKinsey estimates that COVID-19 has accelerated digitalisation of customer interactions by three years globally.
Because of this accelerated change, our receptiveness to change has also increased. While COVID forced digital change upon us, it was (by and large) successful. In many companies that wouldn’t accept remote working, it’s now commonplace. Because of this success, people are now more open to further change than ever before. Change management is often the hardest part of any change, well COVID’s enforced change means resistance to change is lower than it’s ever been. If you want to bring in a new process or a new system that requires either your customers or your staff to do things in a different way - now is the time to do it.
While the possibilities for modernising and improving your business with fintech solutions are virtually limitless, payments are an easy win. Virtual cards, in particular, show a clear advantage over other payment methods. They’re well proven and have been around for some time in other industries, but it’s taken a crisis for many travel providers to start realising the advantages they offer.
Virtual cards have a much lower risk of compromise than physical cards. While physical cards use the same card numbers again and again, virtual cards generate unique card numbers for every transaction, or set of transactions and then discard them. This makes the risk of exposure and loss minimal. Also, if there is any dispute (say a supplier doesn’t deliver the services it promised) you can claim a refund through the card scheme’s dispute process rather than having to rely on the individual policies of the hotel or airline.
When you’re using a virtual card payment system you can usually plug your booking system straight into it via API and tailor the way it works to reduce the level of manual processing at your end. This is particularly useful for reconciliations in smarter solutions. Our solution will show the exact amount for every payment (not splitting it into pre-authorisations and settlements) allowing much easier reconciliation for your finance team. You can also elect to add extra data, for richer payment information that syncs better with your systems, like passport details, ticket numbers etc.
With the Pax2pay payment solution you can also benefit from kickback on transactions using virtual cards. So whilst you can also save money using a variety of foreign exchange options, virtual cards also offer an additional revenue stream. Turning a cost into a revenue driver.
Saul Alinsky doesn’t get talked about much in the travel industry. But one thing he said is very relevant right now: “Never let a good crisis go to waste”. COVID has, in general, been terrible for the travel industry, but it has also created opportunities. Smart companies are taking advantage of the crisis to modernise their systems and find efficiencies through fintech solutions. Those that miss out will be running at a disadvantage as travel bounces back.
If you’d like to see how virtual cards, or another fintech payment solution, can improve your travel business, please get in touch.