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Just a few years ago, it was customary to pay for travel with cards, or perhaps even cash in some markets. We knew, however, that the payments industry was being opened-up on a grand scale thanks to the introduction of the wide ranging Second Payment Services Directive (PSD 2) that made it possible for non-banks to begin offering payments. Despite PSD 2 grabbing the headlines, most in the industry hadn’t heard about the new Strong Customer Authentication (SCA) requirements, let alone devised a plan to implement them. In the B2B world, some agencies had experimented with virtual cards but the vast amount of volume was paid via legacy methods like lodge cards. And the concept of ‘frictionless payments’ in travel was nothing more than a dream as customers battled against poor checkout flows, a lack of choice and limited price transparency. My, how things are changing.
Fast-forward to the present and we’re seeing a range of trends that re-define how people pay for travel.
Before delving into my predictions, let's take a look at what trends our partners and industry experts think will take the lead in 2020:
Now, here are my predictions for how four trends are going to play out in 2020.
1. Delivering Strong Customer Authentication
By now we’ve probably all heard about the importance of delivering the Strong Customer Authentication (SCA) requirements for electronic payments made within the European Economic Area (EEA) to be subject to two-factor authentication. But 2020 is when things get real for the travel industry as the revised enforcement date of 31 December 2020 draws near.
For airlines, agencies and hotels that sell large volumes indirectly and are part of multi-merchant packages, authenticating card holders with two-factors is far from straightforward. We’re going to see a rush to build in the industry’s new 3D Secure protocol which helps address this challenge, particularly for direct sales. When it comes to indirect sales, particularly in the corporate travel world, there will have to be even closer collaboration between issuers, technology partners, travel providers and Travel Management Companies if we’re to rise to this challenge.
2. The explosion of payment methods will intensify
According to our own Travel Payments Guide data analysis, local, or alternative, methods of payment surpassed cards and cash combined for the first time in 2019. There are now over 300 ways for travelers to pay and I don’t see this explosion of innovation slowing any time soon.
Polish mobile payment specialist BLIK was handling around 200,000 transactions just a couple of years ago and is on course to hit 200 million this year and there are a host of similar examples from right across the world. In 2020, it’s my belief that many travel players will underestimate the pace of change and are likely to lose out on business simply because they don’t allow people to pay in the way they want. The US is a card dominated market but even there, 45% of millennials don’t have a credit card according to PPRO’s consumer market survey.
3. Cards are going virtual, 2020 is the tipping point
We’ve been talking about the fraud-reduction and reconciliation benefits of virtual cards for a number of years but they still represent just a fraction of how agencies pay suppliers like airlines. This transition is definitely going to ramp-up in 2020 as trends like SCA and New Distribution Capability (NDC) adoption naturally push people towards the data-rich capabilities of virtual payments. For example, New Distribution Capability, will make the in-direct booking process more akin to the e-Commerce channel and this certainly suits modern, digital payment methods. There are also moves to put virtual cards in the hands of business travelers via their mobile. Whilst this is not something we’re involved with I can see growth there as well. Virtualising card payments is preferable for corporations, travelers, agencies, suppliers, technology companies and the banks – 2020 looks like the tipping point.
4. Frictionless payments will arrive
I’m an optimist, so I’m going out on a limb to say I think at least a handful of travel brands will deliver a payments experience that can legitimately be described as frictionless in 2020. For me, that means being able to pay how you want, with just a couple of clicks – preferably none - via your device of choice, with foreign exchange transparency and real-time fraud checks that don’t slow down the payment. And importantly, this is right across the travel experience, whether booking at home or buying lounge access at the airport.
At Amadeus, our payments strategy is to integrate payments innovation for our customers, so they can access everything they need via a single link to make frictionless payments a reality. Based on the capabilities of our partners I’ve every confidence frictionless payments are coming next year.