By Colin Smyth
2020 was one of the most difficult years the travel industry has ever seen. Due to the restrictions in place for much of the year, international travel has taken a significant hit, with airline passenger revenue estimated to decline by as much USD314 billion: approximately 55 percent less than 2019, according to the International Air Transport Association. And Canada is no exception.
Fortunately, despite the gloomy outlook, the travel industry has a long track record of recovering from global crises and challenges. And many believe that it will bounce back again despite the many obstacles posed by COVID-19. Already, we’re seeing agents, operators and providers capitalize on pent-up demand for their services and experiences as travellers plan to get back to what they love in 2021.
But not without some adjustments. Many travel operators have made great efforts to reduce operating costs and streamline operations in an effort to conserve cash and maintain financial health. This will make them stronger and more resilient as travel bounces back in 2021 and beyond.
One area where operators would be well-advised to focus is payment processing costs. While credit cards have historically been the most accepted payment method for travel companies, merchant and bank fees that accompany them have become increasingly complex and can quickly eat away at a company’s revenue.
Additionally, there is an increasing number of disruptive FinTech companies and payment processors whose goal is to simplify the payment process while reducing associated costs. No industry is better suited to take advantage of these opportunities than travel, with its inherently complex and costly international payments.
Three steps to start saving
Here are three steps you can take right away to reduce your international payment processing costs.
1. Understand your fees. Card fees are determined by a number of contributing factors, including the card network, the issuing bank, the type of card being charged and the location of both the merchant and the cardholder. These fees can often range from 2 percent to 5 percent of the total payment. Other methods, such as wire transfers and PayPal, have similar fee structures as well.
Look closely at your acquirer and bank statements to ensure their accuracy and that you fully understand the various fees you may be getting charged, such as scheme fees, interchange fees, payment gateway fees, transfer fees and margins. Make note of any changes month-over-month and be sure to raise any concerns about fees with your bank.
For more help, check out our blog: “Best practices for card payments in the travel industry”.
2. Compare payment processors. Once you better understand the fees that you may be charged, it is time to compare payment processors. Survey your industry peers to find out what processors are being used by others in the travel space. When you approach a new processor to get pricing, emphasizing things such as your past positive credit history, large potential payment volume and pricing you’ve received from other processors can help provide you leverage in negotiating lower costs. Remember, however, to consider and ask about factors beyond just the processing costs, including availability of merchant/payer support, security features, the payment experience and ease of integration/implementation into your existing processes.
3. Offer multiple payment methods. While credit cards are the most commonly used and widely accepted payment method in the travel industry, now is a good time to consider alternative payment methods as they are often less expensive for you and your guest. These methods may include debit, digital wallets, online currency exchange networks, peer to peer payment apps and local bank transfers (i.e. ACH, SEPA, EFT).
In addition to many of these methods being less expensive, by offering a variety of payment options that are familiar to your guests, acceptance rates will increase, and abandonment will decrease, which can also potentially reduce your costs. Rather than initiating relationships with a variety of payment processors to increase client payment options, seek out a payment processor that provides multiple methods within their platform.
By arming yourself with knowledge about fee structures across methods and platforms, you’ll be better positioned to reduce your costs and improve the payment experience for your valued customers. Even smaller travel companies can save tens of thousands of dollars and euros a year this way.
Colin Smyth is senior director of travel, Flywire.
Source: http://totalfinance.ca/optimizing-travel-payment-practices/