Comprehending the travel industry and travel merchants’ challenges in today’s world
Thursday 15 August 2019 | 09:15 AM CET
The Paypers has interviewed Jean-Christophe Lacour, Head of Merchants Services at Amadeus Payments, to learn more about the travel industry
How big is the travel industry and what is its potential for growth?
According to the World Travel and Tourism Council, the industry is very big, worth USD 8.8 trillion in economic value in 2018. It is a huge contribution to the economy, both in terms of revenue, as well as employment, with 320 million jobs. In terms of growth, it is the eighth consecutive year when the travel industry has outperformed the global economy – therefore, travel registered 3.9% growth versus 3.2% growth in GDP on a global basis.
What challenges do travel merchants face when it comes to accepting and making payments?
We work with both global travel merchants, as well as local ones with a priority on just one market and perhaps one channel. However, the majority of our customers operate across multiple geographies and multiple channels, so the main challenge that they face is to provide the right experience to the traveller, to be able to offer them the preferred payment methods in the right countries.
We estimate there are over 300 payment methods in the world where the customer doesn’t pay directly by card (even if the actual funding method may be the card), which also vary by market, and if you want to be successful in a particular market, you have to support the favourite payment methods in that specific market. Doing otherwise might not prevent you from doing business, but it might put you at a disadvantage versus your competitors – and that’s one of the reasons why we have partnered with PPRO. PPRO is an aggregator of alternative forms of payments, and they do the heavy lifting of connecting to all those payment methods. In turn, we are able to offer our merchant customers a simple way for them to accept the payment methods they want in the markets where they are present. Therefore, it is a win-win situation for us.
The consistency of the payment experience across multiple channels is another ongoing challenge and something that the industry is working on. We have done a survey and, on average, a traveller has to use four different payment methods across the lifecycle of their trip – from the moment they make the booking (and maybe they are going to turn up at the airport and they are going to pay for extra luggage or a seat upgrade) to the payment method they use in the countries of destination. So one of the challenges is to be able to offer a more consistent experience to those travellers by taking into account the channel that they are using to interact with the travel suppliers and the markets that they are in.
You have recently launched the Travel Payments Guide, together with your new partner PPRO. Could you tell us what are some of the key highlights from the guide?
A main one is that in Asia around 60% of all travel is now paid for by using alternative payment methods, e-wallets in particular – specifically, payment methods like Alipay and WeChat Pay. It is notable that in Asia these payment methods have taken over the market in such a rapid way. This does not mean that cards do not exist or are not being used. However, the preferred payment method now is digitally native, mobile phone-based; even if this means that within these e-wallets you still have cards.
Another highlight from the guide is the evolution of alternative payments in other markets. In the US, for example, which has traditionally been a very strong card market, alternative payment methods are making headways. Over the last 12 months, alternative payments have grabbed a 4% market share of transactions against cards. So cards are still dominant, with 57%, but alternative payments are rapidly moving, with different players in different markets.
A third highlight from the guide is that, in Europe, we have also been taken aback by how quickly some of the alternative payment methods have grown against cards, in particular in countries like France, Spain, or Sweden, where they have grown by 7% year on year. In Sweden, for example, Klarna gives you the opportunity to pay by credit and an increasing number of people are opting for Klarna at the checkout.
How can travel merchants handle the explosion in alternative payment methods, whilst keeping costs under control?
What you would need to do as a travel merchant is literally engage directly with each of those providers. This would imply negotiating contracts and payment terms – in other words, a significant overhead. Secondly, unless you command significant transaction volumes, you would not be able to negotiate the best terms and so you would be paying more. That is why the best way for travel merchants to keep up with these payment methods and keep costs under control is to outsource them to their payment provider, to Amadeus for example – and to take advantage of our partnership with PPRO.
How is Amadeus helping travel merchants to be SCA-ready across all their sales channels?
The spirit of Strong Customer Authentication (SCA) is to make ecommerce more secure, and we stepped in a long time ago with a 3DS 1.0 solution that is SCA-compliant. We have also developed a solution that takes advantage of the benefits from the new 3DS 2.1 protocol, giving our merchants the option and the choice of whether to deploy 1.0 or 2.1 in the markets they serve. Therefore, some customers may decide to continue with 1.0 outside of the European Economic Area (the jurisdiction for SCA) and choose to go with 3DS 2.1 in Europe. They can have a simple, single implementation with us and they just need to configure market by market. So it’s really “plug and play” and it will address their needs in Europe for ecommerce and mobile. Furthermore, our solution will automatically evolve to the forthcoming 3DS 2.2 protocol and will support the exemptions afforded by the SCA regulation.
Moreover, we are now working to make Amadeus (our system that handles 44% of all airline bookings made via travel agencies) SCA-ready, helping online travel agencies authenticate their customers and pass on the proof of authentication downstream in the authorisation request. Therefore, we are helping our customers be ready for SCA, for 14 September, in these tangible ways and across all sales channels.
About Jean-Christophe Lacour
Jean-Christophe Lacour is the Head of Merchants Services at Amadeus Payments. He joined Amadeus in 2016. Prior to that, Jean-Christophe held a number of senior roles at Visa Europe.
Amadeus is a leading provider of advanced technology solutions for the global travel industry. Customer groups include travel providers (eg airlines, hotels, rail and ferry operators, etc), travel sellers (travel agencies and websites), and travel buyers (corporations and travel management companies).