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New Payment Offerings Aim to Re-Energize the Travel Industry

Don Apgar by Don Apgar
January 7, 2022
in Analysts Coverage, Travel
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New Payment Offerings Aim to Re-Energize the Travel Industry

New Payment Offerings Aim to Re-Energize the Travel Industry

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Much of the recent news in payments has been focused on the meteoric growth of e-commerce and contactless everything amidst the persistent COVID-19 virus and its variants. Travel markets that were heavily impacted at the onset of the pandemic have been struggling to regain lost ground as travelers are starting to venture out to business conferences and vacation destinations. Amidst the regrowth in the travel sector, new payment options and technologies have been emerging to support that growth.

Two trends that we have written about lately – Buy Now, Pay Later and open banking – are finding use cases in the travel sector as well. In addition to offering new ways for travelers to afford and pay for travel, these new payment options are broadening the base of financial services that travel providers can offer their customers. Co-branded credit cards that offer perks for travelers and generate revenue for the brand partner have been commonplace in the travel sector for decades. Providing customers with the ability to link their bank accounts to pay for travel, or defer payments through a BNPL installment plan, broadens the base of embedded financial services that travel companies can deliver.

As an example, some travel providers are partnering with fintech startups to provide programs that allow travelers to freeze the price of a flight or hotel booking, locking in the given price, for a fee. If the price increases, the traveler still pays the locked price. If it falls, the traveler pays the new lower price. Fintech startup Hopper is one such company that provides this type of program, and they report a 56% average attachment rate for flight bookings, which increases to 70% when hotels are included. Hopper says its services generate an additional $42 on top of the average flight spend of $355 – very impressive results.

We expect to see more travel providers partnering with fintech companies to expand their embedded finance capabilities in 2022. While payments alone won’t revive travel, new financial options for travelers will certainly help the industry.

Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group

Tags: BNPLbuy now pay latere-commerceembedded financeembedded paymentsFintechfintechsflexible payment optionsOpen Bankingtraveltravel payments
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