How to make payments work for your travel business
Harry White, travel expert at Ecommpay, a leading international payment service provider, explains how travel operators can use payments – and indeed payment partners – as a strategic growth lever post-pandemic.
Harry, what’s the current ‘state of the nation’ in the travel industry from your vantage point?
In the last few years, we’ve had to deal with everything from a global pandemic to geopolitical turmoil and economic woes.
Relationships, balance sheets and liquidity have all suffered. But the businesses that have survived have learned a great deal and proved themselves strong.
I’ve seen the sector become more resilient because of Covid. Necessity is the mother of invention after all, and it’s been a case of adapt or die.
Both travel operators and payment providers had to update policies, terms and conditions, plus consider things they may never have considered before, particularly around how they manage risk and convert sales.
Have payment providers tightened their requirements for working with travel businesses?
That’s tricky as it really depends on the provider. Since the pandemic, some providers and acquirers have been cautious when it comes to working with travel companies. Some have off-boarded clients.
Almost everyone in the industry has heard horror stories of operators being given 30 days’ notice of termination, with little-to-no warning or explanation.
At Ecommpay, we don't necessarily consider the travel industry high risk. But that’s because we’re specialists in the space and have the risk appetite but also the controls in place to manage it.
That said, we certainly don't want to end up footing the bill if an operator fails. If we’d processed £50 million worth of card sales and the operator went bust, we’d be dealing with a scary amount of potential chargebacks.
What do you consider before onboarding a travel client?
I am confident in our product to manage potential risk, but before we approach a merchant, we need to have a good idea of where the risk is and how we will need to manage it.
I examine each merchant’s business model before the contract and onboarding stage. For example, one operator issues tickets within 24 hours, which come directly from the airline. In that scenario, the airline can't cancel the ticket because they've already been paid. If the travel operator fails, the tickets are still valid, which decreases our risk exposure.
Another one of our merchants organizes religious tours. When the current Middle Eastern conflict began, several airlines cancelled flights, leaving them with £100,000 in refunds. They had learned from the pandemic, updated their terms and conditions, and improved customer communication.
As their acquirer, we were confident they knew how to manage the situation. Other providers would simply ask for a £100,000 hold-back and instruct the merchant to issue refunds, which isn’t helpful, really.
In summary, it's all about developing a close partnership, being open and devising policies and systems to manage risk.
Well, how can travel operators minimise their risk exposure?
Unfortunately, there's no silver bullet. Rather, it’s a matrix of measures. One practical tip for operators is to have the correct terms and conditions in place. This helps mitigate the impact of card chargebacks for both operators and providers. If you're in doubt, ask your payment partner for help.
Ecommpay has a standard terms and conditions template that protects against most eventualities. Also, remember that card schemes may not accept your terms and conditions. As a principal member of Visa and Mastercard, we can help guide operators towards best practice.
We have some great risk portfolio managers at Ecommpay. But any good risk analyst will tell you that it’s neither possible nor desirable to reduce risk exposure to zero.
What happens if we have another pandemic, a tsunami or an Icelandic volcano erupts? We need to be adaptable and work together with a full understanding of how operators do business and treat their customers.
Getting paid is essential for every business, so what are the main payment pain points for travel operators currently, and how do they overcome them?
Converting sales is the #1 pain point, as it is for almost every sector. Macro-economic factors are contributing to market fluctuations and a decline in purchasing power. But small tweaks to checkout UX can realise big conversion gains.
Cards are a popular way to make online payments. But they’re not universally popular. Mostly because there’s no universal way to pay.
Giving your customers more choice in how they pay helps boost conversion, especially as almost
three-quarters (71%) of consumers say they would be ‘very’ or ‘somewhat’ likely to abandon their checkout and shop elsewhere if their preferred payment method wasn’t available.
I’d advise looking into Google Pay and Apple Pay. We all use our smartphones to pay in shops, and many people no longer carry a wallet. The ‘Pays’ work in a similar way for e-commerce sales as they do in-person. Cards loaded into these digital wallets are pre-authorized, so it side-steps some online checkout friction, thus boosting conversion.
Open Banking is another exciting payment method gaining traction in the UK and Europe. It securely connects customers to their bank during checkout, so they can pay directly from their account. For operators, this helps lower payment costs, as typical card fees and chargebacks are not present, plus speeds up settlement.
There’s also buy-now-pay-later, or BNPL for short.
Ecommpay a tailored BNPL product for UK travel businesses, who can offer their customers the option to pay in instalments, pay in 30 days or pay over time options at checkout. This gives customers the chance to spread out what’s typically a larger purchase. And it helps convert more sales for travel operators.
Finally, what should a travel operator look for when choosing a payment service provider?
My advice is to pick a payments partner who’s a specialist in your sector. Someone who really understands the ins and outs of your business and industry. Next, look at their people. You want someone human, who will be understanding of your situation and answer the phone when things go wrong.
But also, don’t be afraid to ask more from partners. If you’re not getting the service you need, ask them why. If they can’t do it and it’s something you really need, then you have your answer. If they’re not prepared to, then maybe it’s time to review your situation.
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