The Changing Face Of The Travel Payments Supply Chain

It was too much to hope that the world would be transformed on Jan. 1, 2020. After a year of weathering the pandemic with travel industry players, as Flywire’s Travel Segment head Colin Smyth told PYMNTS' Karen Webster in a recent conversation, he knew it wasn’t going to happen, at least, not immediately.

He noted positive signs of life returning to the travel segment that are becoming visible each day. After the U.K.’s prime minister lifted travel restrictions for Brits effective in late spring, traffic shot up by 500 percent on U.K. travel websites. The pent-up demand is real and felt acutely worldwide, as consumers are looking for ways to get back out on the road and fly the friendly skies.

“I think among people who want to travel for leisure, those who will be vaccinated anyway, they are fine to do whatever is required as it comes together. Their attitude is, ‘Yeah. I’ll sign up for [clearance] or whatever I have to, prove I’m vaccinated and I’ll get to the airport an hour earlier to walk through and demonstrate it,” Smyth said.

But Smyth noted as it is becoming increasingly evident in the industry that while demand is percolating under the surface with vaccines in circulation — it is also quite clear the return of normal is not quite imminent yet, and that the remainder of winter will likely be rough. More positive signs may emerge in Q3 and Q4 with normalization “really ramping up as we go into 2022,” he said, but travel industry players still have as much as 18 months of a disrupted cash flow ahead of them to figure out.

“There are a lot of things that still have to kind of come together,” Smyth said “I think this is where technology will come into play.”

Recreating The Travel Supply Chain

One of the pieces of evidence that consumers are readying for their return to travel, Smyth noted, is the dramatic upswings of what he described as exploratory bookings. Travel players are putting together preliminary itineraries for consumers looking to book trips but holding off on taking payments for those trips.

“They are not allowing the payment to go through yet because they don’t want to take on the chargeback risks,” Smyth explained. “They may just be looking at a generalized quote, giving you a range and saying, ‘Hey, this is what it would look like. As we get closer, we’ll lock you into plus or minus this number.’”

That, Webster noted, presents a pretty definite hiccup in the supply chain — where consumer payments in advance are accepted as par for the course. Can these firms afford to float for months and as much as a year and a half without locking down those payments?

That, Smyth said, is a complicated question that will require no small amount of creativity from firms as they figure out how to keep cash flowing through their supply chain.

Some travel industry providers are working with Flywire to build what he called a “group payment” experience wherein travelers pay their provider once — and the funds flow on the backend to each place they need to go to support the trip.

“Say you have a family that’s paying to go to Italy — we’re working with clients on creating a system where they only have to pay once and it covers the taxi cab that picks them up in Rome, or their hotel, their tours, all of it. Consumers just want to put a bunch of euros into a bank account and then have someone else say commissions are owed in yen, commissions are owed in Singapore dollars, in the U.S. dollars and Canadian dollar and then have them figure that all out. The customer and the travel agent don’t really want to deal with it. And that’s where we’re starting to see the business evolve — allowing for a straight-line payment that moves through an international supply chain very easily.”

Building that increasingly necessarily one-shot straight-line payment path is among things Flywire can do to help their industry partners transition toward the industry’s future. A start, he noted, but not an end as the travel industry as a whole has a lot of rethinking to do and new frontiers to explore going forward.

Embracing The New

As the travel industry begins to pick itself up, Smyth noted that there would be many areas where it will have to change its approach. Players need to rethink how they use social media to forge that direct connection to their customers and best tap into what looks like a rush to return to travel. Travel firms, he noted, are starting to figure out some of these opportunities and reorganizing their platforms and the ways they use marketing to engage with potential customers directly.

They are also coming around to the idea of embracing buy now, pay later programs to draw consumers, he said. BNPL has historically been a bit slow to catch on in travel, he noted, for the simple reason that operators across the board didn’t feel like they needed it as they were scoring massive profits with consumers paying for their travel costs up front, all at once.

“Some of the companies that we work with, I think they’ll be very open to it to get more cash flow in, to get paid faster. And I don’t think you’ll get as much pushback as there has been. If it can help the supply chain get paid faster, therefore be in business longer, it sounds interesting to us and is something that our clients would be more interested in today than they probably would’ve been 18 months ago,” Smyth noted.

Because travel, as an industry, has been through a rather strange and trying journey over the last 12 months. A trip that is coming to an end but is still not quite over. Consumers, he noted, want to get back out there, but they want to feel safe doing it. Technology can and will help providers bridge both of those gaps over the next several months as that pent-up consumer demand starts to filter fast into the market.

“I think that people will, in a digital manner, potentially start to look at a travel adviser in a different way than they probably have before. And ... the person who figures that out how to make that connection from a digital standpoint will be the big winner in this space.”