A report from Skyscanner shows that, globally, 81% of people plan to travel the same, if not more, in 2024 than they did last year. And three-quarters (76%) are planning to spend the same amount, or more, than in 2023. We’re seeing this growth first-hand – Thredd’s transactions in the travel sector are up 27% so far this year, when compared with 2023.
Our Travel Unstitched 2024 report highlights that we are now in the midst of a formidable tide of growth in B2B travel payments, with the global market expected to hit $1.7trn by 2027.
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The travel industry’s ability to leverage a new wave of payments innovation represents a crucial opportunity to help ambitious organisations navigate cross-border payment pain points to meet their business goals.
Bypassing a complex web of issues
For travel providers, travel aggregators, and online travel agencies (OTAs) keeping on top of all the considerations related to paying their suppliers can be difficult and many have understandably found themselves confounded by the myriad factors at play when it comes to cross-border payments. However, for those who manage this effectively there are huge opportunities for reducing operating costs, therefore allowing them to offer more competitive pricing to both suppliers and customers and in turn strengthening customer acquisition and market share.
For many, pricing and currency fluctuations are the main pain point. Then there is a host of country-specific regulatory requirements, on top of broader AML requirements. Whilst there have been measures to foster regional harmonisation, such as Cross-Border Payment Regulation 2 (CBPR2) in Europe, some countries around the world have additional bank or fund flow restrictions when using cross-border payouts. These are constantly evolving and require a compliant finger on the pulse to ensure a business is meeting its obligations.
Up until recently, payment processes within the travel sector were also still characterised by manual interventions and fragmented systems, resulting in inefficiencies, human error, and a lack of standardisation across the industry.
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By GlobalDataNew fintech innovations are touching down
Luckily, things are changing. New fintech solutions are arriving to help OTAs and other providers to better streamline and secure their transactions. We’re seeing more solutions that leverage industry-specific expertise to inform smarter innovation.
Whilst most of the innovation in travel payments to date has come from the merchant or acceptance side, there are emerging opportunities in the lesser-known issuing side. This includes utilising virtual card payments to manage the multitude of international suppliers that are typical of any travel organisation.
By operating on existing card payment rails, virtual card payments allow for settlement in local country and currency, cutting out many of the pricing and FX issues associated with cross-border payments.
But this is just one advantage that virtual cards can provide.
They also enhance user experience through the ability to create one-time, or multi-use, financial instruments for settling payments with suppliers on behalf of customers – or indeed funding customers directly when circumstances require.
They reduce the risk of fraud through the use of unique card numbers for each transaction, and they prompt faster movement of funds, which leads to improved cash flow for both suppliers and buyers. They also improve control and visibility through the ability to set spending limits and track usage in real time. And – importantly – they help reduce costs for OTAs and other providers by replacing legacy paper-based payment processes.
These benefits underpin what is a proven and growing tool for OTAs, with the market for virtual cards expected to reach $300bn by 2027.
Of course, such growth creates more choices for those in the travel industry to evaluate. Many of the larger players have acquired payments expertise in-house, while others will need external support to keep up. However, our research highlighted that 60% of online travel businesses struggle to find qualified partners with the necessary expertise to support and guide them.
Virtual card technology has been around for a while and is solving for a broad range of use cases from insurance payouts to instant payments for gig economy workers. At Thredd we’re starting to see more and more businesses come to us looking to adopt these solutions in-house as well as forward thinking programme managers who want to enable virtual cards for their own customers.
Betsy Samuel is Chief Marketing Officer, Thredd
