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Author: Tarun Kapoor |07/08/19

Digital Payments and the Era of Cashless Travel

Who doesn’t want an Uber-like experience when it comes to travel? In travel, the payment experience can determine the success of conversion from prospect to a first-time customer to loyalty. Cashless payment options are becoming the determining factor on how customers book travel, and who they remain loyal with. Moreover, a seamless payment experience increases the opportunities for ancillary revenue.

More and more countries are moving towards becoming cashless economies. According to “Payment patterns in Sweden”, a 2018 survey by SVERIGES RIKSBANK (the central bank of Sweden - It is the world's oldest central bank and the third oldest bank in operation), it can be difficult to use cash in Sweden, as only 13% of payments carry cash. The percentage of respondents who used cash for their most recent purchase has on average declined by 15 per cent a year between 2010 and 2016. The rate of decline was particularly high between 2012 and 2014 and amounted to around 30 per cent. ATMs are no longer popular and even banks have stopped dispensing cash. Instead, mobile apps like Swish are the preferred way to make transactions. However, if you are in China, QR codes are the preferred way to pay. The collective total of mobile payments surpassed $5.5 trillion dollars last year, with most of that figure coming from QR code payments on the WeChat and Alipay apps. Alipay is used for basic travel payments such as getting a taxi. Finland has become the top cashless travel country for Chinese tourists. Finland and Japan both accept QR codes supported by WeChat Pay or Alipay, attracting more Chinese tourists.

Around the world, Paypal and Alipay make it really easy to pay for travel on airlines, hotels, car rentals and more. Bitcoin ATMs are popping up globally, which makes it easier for travelers to withdraw money by entering their phone number, pin and by scanning their palms. Companies like Apple and Samsung for instance, also offer their customers the chance to pay through their phones.

The Convenience of Cashless Technology in Travel

Contactless technology and infrastructure are enabling seamless customer journeys in travel. According to Gartner, it is estimated that by 2020, customers will manage 85% of their relationship with the enterprise without interacting with a human. Google Pay offers integrations into mobile and wearable devices for easy-to-manage payments while traveling and keeping track of receipts. As chatbots such as WeChat become the preferred way of communication for travel booking, the customer journey must integrate cashless booking options for completion and conversion. Visa and AeroMexico offer customers the ability to pay through the WhatsApp bot for seamless transactions. Wristbands are offering a completely cashless experience at theme parks and cruise lines that are easily integrated into a mobile device.

As cashless payment options become more popular in travel, is your organization ready to meet customer demands? I recently experienced at Aviation Festival Americas, 2019 that mobile payments are now in motion even during the flight journey. Payments for wifi/ food/ entertainment etc. can be made during the journey from one’s seat through mobile devices such as the mobile wallet. A mobile wallet works without downloading an app and can provide in-time notifications to provide upsell opportunities. Hence, airlines such as Delta are piloting free wifi to create a seamless mobile payment experience. Airlines can enable bidding and paying for flight upgrades ‘during’ the journey. Travelers’ mobile devices can be linked to the back-seat entertainment systems through bluetooth. With these initial moves, Airlines are now preparing to sell more experiences and ancillaries to the traveler during the journey to grow ancillary revenue.

Virtual Cards have opened a more secure door for corporate travel. Virtual cards have a 16-digit number, without a physical card. Payments made through virtual cards can be regulated by setting parameters. Any hotel, car or airline booking payment tried outside these parameters will automatically be declined. The card number and transaction data after the payment becomes void, thus, making virtual cards a very secure method for payments in corporate travel. Each transaction can also be well reconciled automatically with data for accounting purposes.

B2B travel industry is offering cashless payment options as they realize enabling ease of payment for the traveler will only increases revenue opportunities. The partnership between Sabre and Visa will reduce overhead costs for businesses in finance management. This partnership will instead provide a more efficient and less costly method to enhance the business travel purchase experience. This relationship also creates value at each transaction, which enables ancillary services.

Visa is on the forefront of cashless payment options leveraging API technologies to constantly bring innovation in cashless payments and make experiences consistent. Visa’s Michele Herron, SVP of Strategy and Marketing recently shared at the SKIFT Tech conference that Visa would like to embed the payment experience within the travel products. Smooth payments are the anchor for a great customer experience. The ability to walk out the door from an Uber ride without having to pay in cash enables a seamless customer experience.

Cashless payments have improved lives in many cities. The ability to pay for underground transit in New York City or in London through digital payments at the turnstile for transit tickets has enriched the city and its traveler with many benefits. Visa shares a report of the benefits of digital payments in cashless cities. One of the major highlights which stands out from the report includes the benefits realized in over 300 billion dollars a year by cities when transitioning from the costs of cash and check to cashless. One of the other benefits realized by cashless cities is additional revenue realization of $53 million a year due to reduction in cash related crimes. The tax revenue in these cities would increase up to an average of $534 million a year through the addition of digital payments.

Leveraging Customer Data

Customer data, the travel industry’s largest asset is the core for preparing for cashless payments. As airlines, hotels, cruise lines and their partners enter the realm of cashless and mobile payments, the opportunity before us, now, is to efficiently leverage customer data. Understanding the customers’ payment behavior and preferences using predictive analytics can generate tremendous opportunities in ancillary revenue. Knowing your customer can harness the power to deliver superior experiences and capitalize on ancillary revenue. Write to us on info@mindtree.com to learn how Mindtree’s Travel & Hospitality experts can help.

The fear of losing to a disruptor is real. It is imminent for companies in the travel and hospitality industry to evolve and meet customer demands via cashless payments to succeed in the digital future. According to a travel consumer survey by Mindtree, “Expectations vs. Reality: How to Better Serve the Connected Traveler”, 68% of respondents agree technology is the key to a better travel experience― especially those in the 18 to 44 age group. Not being able to serve a large population of worldwide travelers because of not adapting to change will be detrimental to any travel business. As FinTech offers more and more opportunities for cashless payments, the travel and hospitality industry must find opportunities to partner and evolve.

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