It’s been called the worst year in travel history. With the global travel sector losing $1.3 trillion over the course of 2020, according to the U.S. Travel Association, losing over 10 million jobs and accounting for roughly 65 percent of all U.S. job losses during the pandemic, it’s hard to argue against that. The year 2020 was a low-water mark for the entire industry.
The good news is, 2021 is here and the vaccines are going out. The worst has passed (in the U.S.) and the travel industry as a whole is reorienting itself to get checked back in and on the road again.
This means, Spreedly’s Vice President of Product Daniel Wideman told PYMNTs in a recent conversation, travel players are and should be looking more closely into the role of payments in making the consumer reentry as smooth as possible.
For travel providers, one of the verticals within which Spreedly commonly works, the need is particularly acute because the payments are often highly complex, cross-border transactions with many moving pieces and places where things can go wrong. Travel, Wideman noted, is networked by default. Providers have to integrate with partner systems and services, including airlines, car rentals and lodging. It is an industry “intimately familiar” with navigating the burden of building and maintaining homegrown connections to an ever-expanding ecosystem of partners and providers – and where payments orchestration platforms can simplify that complexity.
“For merchants and platforms, payments orchestration quite simply lowers costs. It accelerates time to market and it increases customer retention by improving the customer experience by offering them more choice. The ability to do that quickly, and the impact on customer retention, goes straight to the bottom line,” Wideman explained.
What orchestration does is provide a single point of integration that unlocks access to a whole portfolio of payment providers, both the ones an organization may use today and the ones they may use tomorrow.
“The DIY, build-everything-in-house model increases costs and delays time-to-value. Good payments orchestration is about layers, baking in compliance as a service, keeping track of those regional regulations and emerging protocols, and finding ways to offer turnkey integrations with local PSPS [payments service providers] and acquirers,” noted Wideman.
As he pointed out, lighting up a new market for a travel provider becomes a low-risk and highly efficient proposition. “Travel is highly competitive,” he explained. “So providers are competing on two primary axes: price and customer experience.”
That means in terms of price, reducing the cost of payments by even a few basis points makes a difference. A lower price can be significant, particularly now amid a comeback from COVID, noted Wideman.
Moreover, he added, now is the time that travel operators must reconsider what the opportunity cost of maintaining their status quo approach to payments is going to be.
He said payment complexity, particularly as travel firms are taking it on in multiple markets worldwide, can quickly become prohibitive for providers considering expansion. Players need to decide if payments will be a checked box or become something they can develop into a competitive differentiator and a tool to enhance the customer experience. And if it’s not a checkbox, which it is increasingly becoming apparent that it should not be, payments orchestration is the solution travel players ought to be considering to keep their operations running smoothly.
Because, as their clients have seen, the alternatives aren’t pretty. What the team at Spreedly often sees is customers who come to them because they have felt the pain of an outage in their payment system at the wrong moment or recognized that their payments infrastructure isn’t flexible enough to adapt to new business needs.
“[One of our] customers had a large sale where they had just launched a product and a huge number of customers were coming to the website,” Wideman explained, noting that everything was going as planned until their payments capability crashed for 20 minutes. It may not sound like much time, but when a firm runs highly promoted sales, that is incredibly costly.
“This customer, before they had implemented payments orchestration, were single-threaded. They were only able to access payments through that one provider that went down. And as a result, they lost the millions of dollars they would have been transacting in that 20 minute timeframe,” Wideman said.
And the losses, he noted, only run deeper from there and become harder to calculate, but real nonetheless: all the future sales lost from consumers scared away by the bad experience the outage created for them and who won’t give this merchant a second chance. The power of payment orchestration means that the merchant now has redundancy baked into their payments process to ensure customers always get the best experience possible.
Jordan McKee, principal research analyst at 451 Research, says, “While 69% of online-centric merchants prefer a multi-provider approach to payments, one in five say that their current payment acceptance infrastructure has become a significant inhibitor to the growth of their business. Payment orchestration platforms can help to address the added complexity of a multi-provider strategy through the application of rules, logic, intelligence and streamlined connectivity.”
Payments orchestration, Spreedly believes, is becoming the new normal in travel and elsewhere because it increases a business’ flexibility and allows it to adapt a payments stack and a payments strategy in concert with its business strategy.
The more diversity there is in the payment system, and the more merchants can connect to these diverse payment services, the better it is for everyone involved: the merchants, the platforms and the end-consumers.
May 13, 2021 at 09:00AM