Bart Tompkins, head of Payments Business Unit at the leading European GDS and travel technology firm, tell Lee Hayhurst that firms must embrace the digitisation of payments to drive efficiencies and offer great customer experiences
Amadeus, the European GDS and travel technology giant, has a greater value of transactions going through its system each day than the world’s dominant search engine Google.
That’s an indication of the sheer scale of business the leisure and corporate travel sectors generate on an average day, and represents a huge opportunity for anyone who can help firms manage it.
So, it is no surprise that Amadeus, which sits in a strategically important position between supplier and retailer, has spotted a lucrative business opportunity in the area of B2B payments.
Bart Tompkins, managing director of Amadeus’s Madrid-based Payments Business Unit, said its work is broadly split between “pay in” – airlines receiving payments – and “pay out” – agents paying suppliers.
The former is something Amadeus has been working on with airline partners for many years, the latter is less mature but growing in importance as agents embrace the digitisation of payments as business, along with consumers, move towards a cashless society.
Ultimately, Tompkins says Amadeus looking to “merge pay-in and pay-out” and is currently working to create one “common solution” that ties in all payments to drive greater efficiencies.
“What we are doing is looking at our huge network and overlaying payments on top of those systems. In pay-out, that’s where we help travel firms pay out on a B2B basis.
“That’s more focussed on travel agencies paying mainly airlines, but it could be hotels, or car hire suppliers, or it could be even their electricity bills.
“It’s much newer than our traditional pay-in business but it’s been growing at 400% last year. It’s all around the virtualisation and the digitalisation of payments.
“The whole world is moving into the digital space, and that applies to the pay-in side as to the pay-out side as well.
“Travel agents are far more conscious about how they are receiving payments. The visibility of payments has become more important and they have become more aware of efficiencies.”
Tompkins cited Sweden as a market where he says 35% of people have “not touched cash” in the last three months and merchants are not obliged to accept cash.
“That’s spreading around the world,” he said. “In Kenya mobile payments represent 46% of the country’s GDP. Digital is happening everywhere at all stages in industry.”
This digitisation of payments is at the same time as being a potential benefit in terms of the speed and efficiency of cash flows is also a headache due to the proliferation of payments types.
In China WeChat is a must-have payments platform but there are emerging forms of payment like Klarna in Europe that allows customer to spread their costs.
Amadeus estimates there are 300 payments options available in the world today beyond the traditional credit card.
Tompkins said surveys have found that the cost of processing payments in the travel industry is around 6.2% or €4.5 billion globally. Around 10% to 12% of all payments are made in travel.
This is where Amadeus says it can add value by making the transaction of the payments more efficient between merchant, bank, acquirer, credit card issuer, supplier and consumer.
Travel firms that get this right can benefit not only from greater efficiencies, but by using virtual cards and smart forex technology, derive incremental revenue streams like card rebates.
Increasingly firms are using B2B payment wallets, Tompkins said, which helps them to automate payments in an industry in which efficiencies are vital to offset thin margins.
Amadeus estimates that firms using its payments wallet can achieve a 0.5% increase in margin by reducing overheads on staff employed to deal with things like credit card charge backs.
The technology ensures every payment can be traced back to the customer booking improving accuracy.
A travel firm that transacts €12 million in sales annually needs four members of staff working two days a week just on reconciliation, managing fraud and charge backs, says Tompkins.
“A payment wallet is very efficient and secure. Each payment is clearly identified, so it reduces fraud.
“There is no physical credit card so it’s very hard for someone to go in there and pay into their own bank account. It also makes it very easy in terms of the other side to reconcile.
For customers and businesses alike, paying digitally offers numerous advantages. “They have more flexibility and control over how they pay then ever before,” says Tompkins.
“And there is also the fact that when, unfortunately, airlines do go bankrupt when a payment is made by bank transfer once that money has gone it’s gone and you have to sue the airline.
“When a credit card is being used that payment is made under that credit card’s rules and if the service is not provided then the credit card forces the bank of the airline to refund the money.”
As airlines themselves become more aware of payments efficiencies they are trying to determine which payment types they will accept from travel agency partners to reduce card issuer fees.
The Amadeus wallet offers multiple payment options so the optimal once can be chosen for each transaction based on the preferences of each supplier.
“That capability to use it with different supplier is unique to us,” says Tompkins, “because we have this range of virtual cards. It’s an orchestration layer on top, that’s quite unique.”
Amadeus says today only around 1,000 of the 20,000 agents in its network are using wallet, with the big volume OTA players moving first.
This year, to increase reach, it plans to make onboarding much quicker and easier as it targets the long-tail of agents, but Tompkins said then tech “requires more work” before it can be rolled out.
“In the long term, everyone can use it. It’s still a little bit complicated to install and get up and running the first time.
“Right now, we can get them on line in a month. In two to three years’ time it will be much more widely spread among more agents.”
Payments would seem to be a natural application for emerging blockchain technology, and Tompkins said it will come but is more suited to large transaction volumes.
“The problem is it requires the sender of the payments and the receiver to both use it. Blockchain may well take off more in the B2B space than in the consumer realm.
“The other problem with Blockchain is it’s not very data-use friendly. Because it’s distributed it’s not very easy to analyse.
“Maybe in five years’ time you will see it become a more common means of payment.”
Within Amadeus the Payments Division is seen as a strategic growth business and it has 250 people dedicated to it, including doing research and development.
“The area of payments, generally speaking, is seen as growing in importance for Amadeus both in revenue terms but also customer experience.
“Two out of three consumers say they have had a bad experience trying to pay for something and they will switch to other suppliers, so payments are becoming more important.
“If you go through the booking and the payments does not work, it’s hugely frustrating. As an industry we are moving toward a frictionless experience and making payments almost invisible.
“And B2B should reflect what’s happening in the B2C world. People experience life in B2C and they want to apply it to business as well.”