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Alternative payment methods for travel gaining on plastic

August 11, 2019

Jean-Christophe Lacour, head of merchant services at Amadeus Payments, predicted that the use of alternative payment forms, including things like e-wallets, PayPal and Venmo, will only increase.

"I think cards still have a long future, either as a direct payment method or indirect, embedded into an alternative payment," Lacour said. "But yes, we really think that alternative payments are going to continue to progress beyond where they are today."

Amadeus and its partner, international electronic payment specialist PPRO, jointly commissioned the Travel Payments Guide report. The report found that travelers around the world are choosing alternatives such as e-wallets and bank transfers to pay for travel more than cash and credit cards combined.

For example, in China, e-wallets account for 49% of the country's digital travel spend and are twice as popular as credit cards. In the U.S., e-wallets, such as Apple Pay, are gaining market share and could overtake credit cards as the most popular payment method by 2025, Amadeus said.

In the U.S., credit cards are still the most popular way to pay for travel. Amadeus found that they were used to pay for 57% of travel in 2018, down from 61% in 2017. E-wallets accounted for 23% in 2018, up 3 percentage points from the year prior, and bank transfers accounted for 8%, up 2 points from 2017. Cash accounted for 4%, up 2 points, and "other" accounted for 8%, down 3 points from the year prior.

The "other" alternative payment services popular in the U.S., Amadeus said, are, in no particular order, PayPal, Square Cash, Visa Checkout, PayQuick, Venmo, Zelle and PayNearMe.

Even though alternative payments are growing in popularity, Lacour said many, including e-wallets, still have credit cards underlying payments. For example, if a consumer wants to pay for something using Apple Pay, it is often tied to a credit card (bank accounts can usually be tied to e-wallets, as well).

But while cards aren't going away, Lacour said, "Customers more and more focus on convenience, user experience, and therefore they favor payment methods that give them that convenience where they don't need to enter card numbers again or where they're getting additional benefits."

Every year, alternative payments take about 3% to 4% from credit cards' market share in the U.S., Lacour said. Amadeus predicts that will continue, as consumers are seeking convenience or an "invisible way of paying." He pointed to Uber as an example: A consumer uses the app to hail a car, and payment occurs automatically.

"As alternative payments develop, it is absolutely in the interest of travel agents to support those where they want to be the merchant of record, because then they really have to match the consumer desire for convenience," Lacour said.

Keith Waldon, founder of the Austin, Texas-based Departure Lounge, is among the agency owners who are beginning to think about alternative payments.

"I would certainly be paying attention to it and see what's happening," Waldon said by way of advice to travel advisors.

"I think it will evolve quickly," he added, "because there are opportunistic folks who have some really good backing to come in and disrupt the space, and I think there's a real opportunity for it to be a positive thing for travel agencies."

Waldon accepts credit cards, cash and checks as forms of payment, and he uses a merchant account to send clients a secure form to fill out with their payment method of choice.

He recently partnered with Flywire Payment Solutions, which enables agencies to receive and manage payments, collect commissions and more.

Waldon said Flywire essentially offers an alternative to bank wires, which typically carry fees of around $35 per transaction.

Waldon said Departure Lounge is initially hoping to work with Flywire as a way to accept commission payments from suppliers, who are increasingly trying to pay advisors commissions in a variety of ways, ranging from PayPal to payment processing companies that charge the agency a fee. But down the road, it could potentially offer the agency a way to accept alternative payments from clients, a request Waldon is seeing more and more; he's even had some inquiries about using the bitcoin cryptocurrency to pay for travel.

Evan McElligott, president of Longer Vacations in Portland, Maine, also uses a merchant account and a secure form to accept payment from clients. That form gives clients the option to pay using Apple Pay or PayPal.

Younger clients especially appreciate a secure form of payment that doesn't utilize their credit card information, McElligott said.

He added, "What's going to drive the movement is: 'Who has access to my credit card information?'"

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