Travel companies have faced unprecedented challenges since the start of the pandemic and have suffered more than most businesses. As the world went into lockdown, the travel industry ground to a halt and lost nearly €4 trillion in revenue in 2020, representing 5.5 percent of the global economy.
But now that travel and tourism are returning, albeit cautiously, online travel agents must think carefully about payments and how the right strategy can help them recover and protect the bottom line. New technology is at the heart of every successful payments strategy today. It can improve cash flow, optimise cross-border transactions, streamline administration, and keep costs down.
Here are some of the main considerations when planning your strategy, and why having the right payments partner is crucial for success.
1. Understand and optimise foreign exchange
By definition, the travel industry is international and depends on cross-border payments. When you conduct business with suppliers and customers across different countries, you always face a currency challenge. Online travel agents rely on thin margins which can become even thinner if they don’t pay attention to exchange rates, so they must optimise their foreign exchange strategy to avoid high conversion fees.
Bank transfers, where money is moved directly from an agent’s account to a supplier’s account, are often very costly for international payments, as foreign exchange fees can be steep. There is also a cost in time, as bank transfers involve manual processing and lengthy reconciliation.
An effective card payments strategy, and particularly one based on virtual cards (see below), will ensure you are not disadvantaged by poor currency exchanges. This is why you should work with a payment services provider that offers flexibility and choice. For example, Nium reduces costs and maximises margins with a platform that facilitates payments in more than 60 currencies and issues cards across more than 40 countries.
2. Investigate card options and providers
Thanks to the growth of contactless and remote payments, cards are the foundation of most payments strategies today. For online travel agents, it’s essential to have digital cross-border payments in real-time, which is possible when using global networks such as Visa and Mastercard.
Whichever type of card you need – most usually debit or credit – you should look for a payment service provider with an all-in platform service. Today, thanks to open banking and the growth of fintech, there are many more cost-effective and versatile options than high street banks.
One of the most significant developments for travel payments is the growing use of virtual cards. Like plastic cards, they have 16-digit numbers, an expiry date and a security number. But, unlike plastic cards, they exist only digitally and are usually used for one-off or very restricted transactions, thus preventing fraud. All online travel agents would do well to make virtual cards a key part of their payments strategy. Apart from the benefits of enhanced security and more control over foreign exchange, virtual cards streamline processing and reconciliation.
3. Maximise security and control
Digital transformation has made it easier to execute cross-border payments and build thriving online businesses. But the downside is that digitalisation, and particularly the growth of card-not-present transactions, has encouraged fraud and exposed travel businesses to new risks. The ideal payments strategy must therefore balance speed and efficiency with the need for strong security and control.
This is where virtual cards score highly for B2B travel payments. Because they are created for specific purchases and use randomly generated and disposable numbers, virtual cards are highly secure and can’t be compromised like physical cards.
Customisation is another key benefit, as virtual cards enable you to set the amount limit, supplier details, payment time, and payment currency for every transaction. And because you can assign the cards to designated suppliers, you have better accountability. Purchases and payees are automatically linked, simplifying transaction reconciliations.
4. Make payments pay
Fast, efficient, secure payments are literally the bottom line. Although payments are not usually considered to be a profit centre, with today’s digital technology, plus the right strategy and payment services provider, you can significantly reduce operational costs, enhance cash flow and liquidity, and increase your margins. Cost savings are achievable on multiple levels, from FX and transaction fees through to reconciliation, and working with payments specialists such as Nium can make the difference between profit and loss.
How Nium powers travel payments
When you choose Nium as your payments partner, your business will be backed by a powerful payments platform that offers flexibility and a choice of payment types that can be tailored to your precise needs. You gain instant access to a global network that provides versatile pay-out, pay-in, and card-issuing capabilities. Take a look at our wide range of services and how we support travel and logistics. Then contact us to talk about your requirements.