The next
billion consumers who will become regular leisure travelers will look different
to those in established travel markets in the West today. They will come from
mobile-first societies where the digital environment has evolved in a different
way. This means they will bring with them new payment methods that travel
brands will need to adapt to.
Mobile wallets
are already hugely popular in countries such as China, India, Indonesia, and
Kenya. In China, many consumers keep their plastic on hand solely for when they
travel, instead using apps linked into the social sphere, such as WeChat Pay
and AliPay, when they are spending at home. And that spending is soaring,
already reaching into the trillions in dollar terms. Brands that can tap into
the Chinese app space and allow payment through these giants are giving
themselves a competitive edge in the world’s largest travel market.
Innovation
isn’t just restricted to high growth economies in Asia-Pacific. Mobile wallets
are gaining traction in the West, as are currency cards controlled from apps that
make a compelling case to consumers through far lower fees and charges than
traditional bank cards. Sweden is already a largely cashless society, and it is
even asking the question of whether it needs to slow down in its transition
away from cash.
So, is cash in
terminal decline? Well, not quite. It will remain popular for many years to
come and many pre-loaded currency card operators find travelers largely use
them abroad to withdraw cash sums than to use them directly for payments.
Geography is critical in the trajectory of cash and local preferences are key. Whilst
some developing countries are sprinting ahead with digital payments, others are
almost exclusively cash-based. In developed countries, ingrained behaviors and
infrastructures are also supporting cash. Germans remain highly wedded to physical
currency, carrying more than anyone else in Europe, for example, and this will
take a long time to change. Cash has a feeling of security and trust for
travelers that is hard to replace and is undeniably useful in a wide number of
destinations.
Nonetheless,
the growing range of cash alternatives adds up to a more diverse payments
landscape than anything that has come before and travel brands can reap the
rewards from plugging in. Consumers are more likely to spend when they feel
comfortable and secure in their purchase, which can be aided by localized
payment formats. Introducing seamless payment methods will induce more consumer
spending and travel brands that can adopt these methods successfully can help
to reduce that most stubborn of e-commerce issues – purchase abandonment – as
well as create a more inclusive brand experience that is embedded into social
media applications.
There are
other advantages as well, with newer payment methods and CRM systems richer
data streams are possible that can allow operational decisions in real time. There
is also potential to reduce fraud through more sophisticated authentication.
However, there is also the risk of additional complexity and travel brands will
need to consider their customer make-up and ability to adopt new payment
methods rather than rush headlong into adopting a new medium.
So, please
read on and discover how and where the payment environment is changing and we
hope you enjoy this piece of EyeforTravel research.
Alex Hadwick
Head of Research,
EyeforTravel