Travel Industry Profits Hit by Inefficient Payment Systems

July 16, 2024

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In an era where global travel is surging, a recent study reveals that outdated payment systems are significantly eroding the profits of travel companies. Conducted by Airwallex and Skift Research, the study highlights that 66% of travel executives believe their fragile margins are being squeezed by inefficient payment processes. The findings underscore the urgent need for the travel industry to modernize its financial operations to stay competitive.

Inefficient Payment Systems: A Major Profit Drain

The comprehensive report uncovers that nearly two-thirds of travel companies struggle with outdated payment systems, directly impacting their profit margins. Jack Zhang, Co-founder and CEO at Airwallex, emphasized the critical nature of this issue, stating, “As global travel continues to boom, travel companies increasingly rely on quick and seamless cross-border payments to surpass customer expectations at every touchpoint. However, our latest study shows that slow and outdated payment processes are increasing the cost of moving money internationally, which is eating into their profits—modest at the best of times.”

The Cross-Border Payment Conundrum

One of the most significant challenges highlighted in the report is the complexity of handling cross-border transactions. Despite cross-border payments contributing to at least a quarter of revenues for 70% of travel companies, the diversity of payment methods across different markets complicates these transactions. Managing multiple supplier and vendor payments in numerous countries, coupled with fluctuating foreign exchange (FX) rates, poses a formidable challenge for the industry.

The Push for Financial Modernization

In response to these challenges, 90% of travel executives plan to prioritize upgrading their payment technology over the next 12 months. The goal is to implement unified and scalable payment solutions that reduce the cost and friction associated with managing cross-border transactions. This modernization is not just a priority but a necessity for smaller players looking to compete with larger, more established counterparts.

Rafat Ali, CEO and Founder of Skift, reflected on the significance of the study, “Our survey of global travel executives uncovered new, unique, and even surprising insights into why unified payment and financial systems are critical in meeting today’s traveller expectations. Amid an unprecedented rise in international tourism, the report intends to give travel companies a framework to expand their knowledge base and build more efficient, effective, and profitable businesses through modernized payment and financial operations systems.”

Shifting Payment Preferences Post-Pandemic

The COVID-19 pandemic has accelerated changes in consumer payment preferences, with 88% of travel executives noting a shift in how customers prefer to pay. While credit cards, debit cards, and digital wallets remain prevalent, local payment methods and peer-to-peer payment apps are gaining popularity, particularly in Asia. This shift adds another layer of complexity for travel companies already grappling with diverse payment systems.

The Impact on Revenues and Efficiency

The report also sheds light on the financial impact of these outdated systems. Nearly 75% of travel companies earn more than one-quarter of their revenue from cross-border payments. However, the volatility of FX rates and the need to reconcile multiple supplier and vendor payments in different currencies are significant hurdles. Over 50% of executives report that these challenges hinder their ability to expand their supplier or vendor network in new markets.

The Need for a Unified Payment Platform

A unified payment and financial operations platform could be the solution to these challenges. The study found that 80% of executives expressed interest in such a platform, highlighting its potential to streamline operations and improve efficiency. An all-in-one solution would address issues related to multi-currency payments, fraud risk, and other operational inefficiencies.

Conclusion: A Call to Action

The findings from the Airwallex and Skift Research study provide a crucial wake-up call for the travel industry. To thrive in a rapidly evolving global market, travel companies must prioritize the modernization of their payment systems. The report offers valuable insights and recommendations on how online travel businesses can transform their financial operations to achieve global success.

For a deeper dive into the report and its recommendations, visit Airwallex and Skift.

Key Takeaways

66% of travel companies report profit erosion due to inefficient payment systems.
70% find cross-border payments challenging due to diverse payment methods.
90% of travel executives plan to upgrade payment technology within a year.
The shift in consumer payment preferences post-pandemic adds complexity.
A unified payment platform is critical for improving efficiency and competitiveness.

Final Thoughts

The global travel industry’s future hinges on its ability to adapt to changing payment landscapes. By embracing modern, scalable payment solutions, travel companies can not only protect their profit margins but also enhance customer satisfaction and operational efficiency. The road to financial modernization is clear, and the time to act is now.