Guest Post: The ‘Fintechisation’ of the travel industry - glitz or reality?

Marc Padrosa, global industry director of Kantox, spills the beans on the current status quo

The global economy is moving away from the pattern of discernible, separated sectors. Instead, companies are reorganising traditional industries by focusing, like never before, on technology-empowered customers. Wherever they go, customers seek one-stop shopping experiences to satisfy their needs.

To better serve them - and to generate new sources of revenue - businesses are forced to collaborate with one another, offering products and services that individual companies could not create as effectively on their own. The ultimate goal is to generate network effects, as more users attract still more users.

Nowhere is this trend more visible than in travel, where leading firms are rushing to implement financial technology or fintech solutions to reduce costs, enhance their competitive position, and ultimately enrich the travel experience with a variety of payment solutions.

Welcome to the ‘fintechisation’ of travel.

Industry leaders showing the way

Booking.com started the ball rolling by setting up its own fintech unit three years ago. Headed by Daniel Marovitz, the division's cross-functional teams wasted no time in creating the firm's own payments platform. The company aims to streamline the payment process, mitigating friction for all parties involved.

Booking.com’s ambition is to gain more control of the transactional flow, with all the associated revenue and growth opportunities. Yet, the Amsterdam-based company reckons that its incursion into online payments comes with more responsibilities in terms of managing fraud risk and cancellations on top of the increased regulatory scrutiny.

Still, the payments space acts as a magnet for online travel firms. Mews, a cloud-based property management system (PMS), features an embedded payment gateway that automates tasks “to save time, increase security and improve the guest experience".

Its CEO, Matt Well, said: “Mews is in a unique position to transform the industry as more hoteliers embrace technology. We have a huge opportunity to help them streamline their operations, build more profitable businesses and deliver personalised guest experiences.”

More than payments

While payments-related stories grab most headlines, it is only part of the story. HBX Group, a leading B2B solutions provider, is increasing its Fintech footprint by implementing an automated solution to manage foreign exchange risk between the head office and its 22 foreign affiliates.

The software allows HotelBeds, HBX’s Spanish ‘bedbank’ operator, to maximise exposure netting across the group. For example, two subsidiaries with EUR as their functional currency may have mutually offsetting exposures: as one buys capacity in U.S. dollars, the other simultaneously sells in USD.

Instead of executing external hedging transactions, Headquarters can have these pieces of exposure automatically netted out against one another, allowing the group to save on FX trading costs. HBX Group sees such automated FX risk management as a springboard for growth. By confidently ‘embracing currencies’, the firm is set to capitalise on expanding sales while taking advantage of a variety of FX solutions to reduce contracting costs.

However, the group’s ambition in the fintech area goes well beyond currency management. Daniel Nordholm, leader of HBX’s Fintech and Insurance Division, is preparing a host of  “fintech and insurtech products for the travel ecosystem” to be launched in the coming months. 

Meanwhile, Montréal-based travel app Hopper.com is one of the pioneers in the ‘fintechisation’ of travel. Its Hopper Technology Solutions (HTS) portal offers a set of tools designed to “improve traveller experience while unlocking new revenue streams”, with features that include cancellations, ‘frozen prices’ (to give customers more time to think), and travel insurance-related solutions. 

Hopper.com’s CEO, Frédéric Lalonde, has also announced the launch of a “comprehensive travel portal” with Brazil’s neobank Nubank, marketed as an “end-to-end offering to provide users with a comprehensive and seamless travel booking experience”. 

Testing the waters

Perhaps sensing that fintech-related announcements may contain more glitz than reality, not all travel players are jumping on the fintech bandwagon. Most of them, however, are at least testing the waters. A good example is ‘Buy Now, Pay Later’ (BNPL) solutions.

This alternative online payment method allows customers to purchase products and services without having to commit to the full amount up front. Participants in that space include Fintech companies Affirm, Afterpay, Klarna, and Zip. They are teaming up with a variety of B2C businesses and travel firms.

French retailer C-Discount is a case in point. Under the slogan Postpone your payments, not your holidays, it has succeeded in using BNPL to sell tickets and accommodation across the world. In a recent interview, Mario Gavira, VP of Growth at low-cost travel app Kiwi.com, estimated that as much as 50% of the revenue from C-Discount’s travel unit may be credited to the BNPL solution.

The otherwise cautious, Gavira, added: “Ultimately, BNPL enriches the travel shopping experience. It surely makes sense for expensive, long-haul tickets. To the extent that a specific customer segment craves such solutions, we need to have them thoroughly tried and tested. That’s precisely what we are doing at Kiwi.com—but we are careful to partner with Fintech providers that know how to manage the associated risks”. 

Travel and fintech: searching for first-mover advantage

The seemingly unstoppable ‘fintechisation’ of travel reflects a series of steps taken by industry leaders seeking to seize first-mover advantage. In an industry that lends itself well to the kind of digital solutions provided by fintech companies, the matchup has the hallmarks of a natural fit. 

While payments are their natural habitat, some fintechs are collaborating with travel firms in other capacities as well. Behind the scenes, with less glitz, they help B2B and B2B travel distribution companies automate a complex workflow that encompasses thousands of transactions in dozens of currencies.

Will these first-mover endeavours be rewarded with soaring profitability and valuations down the road? Only time will tell. Meanwhile, industry leaders are taking no chances—they are moving full speed ahead with the ‘fintechisation’ of travel. Expect more travel-fintech announcements in the coming weeks and months.