FinTech transformation in key travel verticals

Amid the post-pandemic recovery, travel companies have competed for share of wallet, but many have remained trapped by manual operations and cumbersome payments. Financial experience affects overall customer satisfaction, so partnerships should be formed between travel agencies and fintech transform internal and external processes, capturing 8% CAGR (2023-2028) opportunities in the $1.6 trillion global airline, surface transportation and attractions market.Payment diversification and reconciliation in airlines

A growing trend towards online transactions means airlines need to diversify payment options, both for direct sales and intermediaries.

The value of the global airline (B2C) market is expected to register a CAGR of 7.4% during 2023-2028 to exceed $1 trillion, of which 80% is expected to be conducted online by 2028

Source: Euromontor International

Transaction reconciliation and reporting is an expensive payment process within airlines. The International Air Transport Association (IATA) noted the complexity of payments, especially when they need to be customer-centric, and launched IATA Pay in 2022 to facilitate payment orchestration and instant bank transfers.

Digital clearing and B2B payment to increase airline engagement

In addition to insurance, airlines are partnering with financial organizations (including the teamwork between Southwest Airlines and PayPal) for rapid payment of compensation to consumers in the event of flight delays/cancellations. With manual approval and distribution, existing methods, including vouchers, are difficult to scale.

Airlines want to integrate solutions to improve payments and loyalty. In 2024, Singapore Airlines (SIA) partnered with Mastercard to extend Mastercard’s Priceless platform to SIA customers for lifestyle rewards. This partnership also helps SIA streamline data analytics, fraud detection and payment processes.

Aiming to achieve better efficiency in the freight business, Cathay Pacific has launched Pay Cargo-based B2B digital freight payment in Asia Pacific to streamline payment with freight partners.

Embedded banking and contactless payments to improve surface transportation

Fintech development is key to sustaining a 10% global CAGR over the 2023-2028 period in surface transportation.It is difficult to switch rail operators for regular domestic travellers, while switching costs for banks are low. To broaden the customer base, SBI (strategic business innovator) Sumishin Net Bank has been offering integrated banking services to Keio since 2023, while Rakuten Bank has partnered with East Japan Railway in 2024. Rail operators can also increase customer loyalty by diversifying to revenue streams at the same time.

In addition to embedded banking, fintechs have promoted cashless payments in rail, bus and taxi companies. For contactless credit cards, US card operators have expanded partnerships with transport operators in Hong Kong and Japan (operated by Quadrac), while UnionPay expands in Europe, partnering with Nexi in Italy. Additionally, fintech companies including Tencent have experimented with palmprint scanning payment in subways, addressing privacy concerns related to face scanning.

For taxis as part of mobility spending within a destination, in 2023, Tencent and Ant Group have established partnerships with card operators to enable the linking of foreign cards to WeChat Pay/AliPay, addressing low acceptance of cards in China. In Hong Kong, Octopus and Wonder attempted to install POS terminals, but only made progress with new taxis.

Integrated integrated solutions to improve the visitor experience at attractions

Attractions, especially theme parks, operate ticketing, season ticket, gift shop, restaurant and hotel businesses. They face challenges to standardize payments across outlets to deliver a consistent experience. They also need integrated solutions to enable real-time revenue analysis and workforce planning. Merlin Entertainments (parent company of Legoland) has partnered with Adyen to integrate solutions in 25 markets globally.Address gaps in financial literacy and transaction fees

Top common challenges include financial skills shortages for travel businesses and transaction fees for adopting digital payments, as inconsistent, slow, cumbersome or expensive payment experiences increase abandonment.Travel companies can conduct pain analyzes to identify pain points along each episode of the customer journey to improve overall customer satisfaction. Additionally, studies can be conducted among fintech providers, including partner search and performance benchmarking, to identify the right candidate and collaborate to address these pain points.

Merchant fees cover POS setup fees and transaction fees, including the merchant discount rate (MDR). Travel businesses could turn to point-of-sale (softPOS) software vendors, including Adyen, to convert phones into softPOS terminals, eliminating hardware expenses.

Airlines hope to maintain credit card transaction fees to support loyalty programs aimed at driving customer engagement (e.g. co-branded cards from Delta and American Express). Instead, taxi companies usually pass on transaction costs to customers. Therefore, to incentivize the use of cashless transactions, taxi companies could learn from airlines to create loyalty programs, running co-branded cards with banks or digital loyalty points powered by fintech.

In conclusion, financial organizations can take a vertical approach to understand the pain points in each vertical and power journey partner for transformation, to stay ahead of the curve. travel trends.

Read our report, Integrated financial ecosystem: Charting the path to service sector transformationfor further analysis.

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