FinTech Transformation Across Key Travel Verticals

Amid post-pandemic recovery, travel firms have been competing for share of wallets, but many have been trapped by manual operations and cumbersome payment. Financial experience impacts overall customer satisfaction, so partnerships should be formed between travel firms and fintechs to transform internal and external processes, catching the 8% CAGR (2023-2028) opportunities in the USD1.6 trillion world market in airlines, surface transport and attractions.Payment diversification and reconciliation in airlines

An increasing tendency for online transactions means that airlines have to diversify payment options, for both direct sales and intermediaries.

The global airlines market value (B2C) is expected to record a 7.4% CAGR over 2023-2028 to exceed USD1 trillion, of which 80% is expected to be conducted online by 2028

^{Source: Euromontor International}

Reconciling and reporting transactions is a costly payment process within airlines. The International Air Transport Association (IATA) noted the complexity of payments, especially when needing to be customer-centric, and launched IATA Pay in 2022 to facilitate payment orchestration and instant bank transfers.

Digital compensation and B2B payment to enhance engagement in airlines

Besides insurance, airlines are partnering with financial organisations (including teamwork between Southwest Airlines and PayPal) for fast compensation payout to consumers on flight delays/cancellations. With manual approval and distribution, existing methods including vouchers are challenging to scale.

Airlines are keen to integrate solutions to enhance payment and loyalty. In 2024, Singapore Airlines (SIA) has partnered with Mastercard to extend Mastercard’s Priceless platform to SIA’s customers for lifestyle rewards. This partnership also helps SIA to streamline data analytics, fraud detection and payment processes.

Aiming to achieve better efficiency in cargo business, Cathay Pacific has launched B2B digital freight payment powered by Pay Cargo in Asia Pacific to streamline payment with freight partners.

Embedded banking and contactless payment to improve surface transport

Fintech development is critical to sustain a 10% global value CAGR over 2023-2028 in surface transport.It is tough to switch railway operators for domestic travellers’ regular commuting, while switching cost for banks is low. To grow the customer base, SBI (strategic business innovator) Sumishin Net Bank has offered embedded banking services to Keio since 2023, while Rakuten Bank has teamed up with East Japan Railway in 2024. Railway operators can also enhance customer loyalty, while diversifying revenue streams.

Besides embedded banking, fintechs have been promoting cashless payments across rail, bus and taxi firms. For contactless credit cards, US card operators have been expanding partnerships with transport operators in Hong Kong and Japan (powered by Quadrac), while UnionPay expands in Europe, partnering with Nexi in Italy. Moreover, fintechs including Tencent have been experimenting with palm-print scan payment in subways, addressing privacy concerns on face scanning.

For taxis as part of in-destination mobility spending, in 2023, Tencent and Ant Group established partnerships with card operators to enable linkage of foreign cards to WeChat Pay/AliPay, addressing the low card acceptance in China. In Hong Kong, Octopus and Wonder attempted to install POS terminals, but only made progress with new taxis.

Embedded integrated solutions to enhance visitor experience at attractions

Attractions, especially theme parks, operate businesses across ticketing, memberships, souvenir shops, restaurants and hotels. They face challenges to standardise the payments across outlets to give a consistent experience. They also need integrated solutions to enable real-time analysis of income and staff planning. Merlin Entertainments (parent company of Legoland) partnered with Adyen to integrate solutions across 25 markets globally.Addressing gaps in financial expertise and transaction expense

Key common challenges include lagging financial expertise for travel firms and transaction fees for digital payment adoption, as inconsistent, slow, cumbersome or expensive payment experiences increase drop-off.Travel companies can conduct struggle analysis to identify pain points along each episode of the customer journey, to improve the overall customer satisfaction. In addition, studies including partner search and performance benchmarking can be conducted among fintech vendors to identify the right candidate, to partner in addressing those pain points.

Merchant fees cover POS installation fees and transaction fees including merchant discount rate (MDR). Travel firms may explore with software POS (softPOS) vendors including Adyen to convert phones into softPOS terminals, eliminating the hardware expense.

Airlines hope to keep the credit card transaction fees to sustain loyalty programmes to drive customer engagement (eg co-branded cards by Delta and American Express). In contrast, taxi firms usually transfer transaction costs to customers. Thus, to drive usage of cashless transactions, taxi firms may learn from airlines to build loyalty programmes, operating co-branded cards with banks or digital loyalty points powered by fintechs.

In conclusion, financial organisations may take a vertical approach to understand pain points in each vertical and power travel partners for transformation, to stay ahead of travel trends.

Read our report, Embedded Finance Ecosystem: Mapping the Path to Services Industries’ Transformation, for further analysis.