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Embedded Finance Powered Transformation Across Travel – Intermediaries, Lodging, Shopping, and Food and Dining

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David Zhang Bio

Travel finance is an important component, impacting overall customer satisfaction across travel verticals. Analysis in this article focuses on embedded finance in travel intermediaries, lodging, shopping, and food and dining, ranked the top four verticals by market value size in 2023.Chart showing World Travel Sales by Vertical and % CAGR 2018-2023

Embedded finance in travel intermediaries

Travel planning and booking is the first phase of a traveller’s customer journey. Online penetration of global travel sales increased from 57.8% in 2019 to 66.2% in 2023 and travel intermediaries transformed digitally to provide a seamless online booking experience.

Free cancellations and easy checkout through digital wallets are top factors that would make online travel shopping better

Source: Euromonitor’s Voice of the Consumer: Digital Survey, fielded March to April 2023

This shows that on top of seamless discovery and navigation through websites or mobile apps, convenient and flexible payment options also are key differentiators amongst online travel agencies.

Revolutionising the payments system is becoming a top business priority in order to streamline payment solutions across territories and serve a wider customer base. Large travel players are paving the way to streamline and enhance payment solutions for internal efficiency and customer experience and satisfaction. For example, Trip.com has partnered with Worldline to offer a wide range of payment options including digital wallets and bank transfers supported by automated rerouting, tackling the long-standing issue of unnecessary declined payments.

Players are also looking to address B2B payment pain points such as fraud management and international VAT recovery. Agoda partnered with Mastercard with the aim to optimise B2B transactions, unifying and simplifying payment processes with partners across the globe through Mastercard’s virtual card payment system. Booking.com also collaborated with Voxel to develop an automated tool to collect invoices and compensate or recover VAT.

Embedded finance in lodging

Payments in hospitality have always been complex, with issues surrounding fragmented payment methods for both room and non-room activities, authorisation processes and compliance. Hospitality players hope to groom direct sales and lower dependency on travel agencies to lessen the burden from high commission fees and complicated payment issues such as cancellation and foreign currency acceptance.

Over 40% of hotel bookings are expected to be direct booking in retail value terms by 2028

Source: Euromonitor International

It is key to balance between being guest-centric and improving efficiency amongst lodging players.

Frasers Hospitality partners with Adyen for an integrated payment solution across their payment chains, enhancing both guest experience and internal operational efficiency. The partnership allows Frasers Hospitality to provide frictionless customer payment experiences through a single platform offering check-in and food and beverages as well as accepting a wide range of payment methods. It also helps manage internal operations through occupancy and seasonality analysis derived from payments data, together with automating auditing processes.

Responding to the accelerating shift to cashless transactions, IHG Hotels & Resorts works with eTip enabling cashless tipping across the IHG network of franchises, managed properties, restaurants and bars. This convenience empowers guests to seamlessly express gratitude towards exceptional service in hospitality.

Embedded finance in shopping, food and dining

Travel spending in shopping, food and dining is projected to grow by an 8% CAGR in transaction value (constant 2023 prices) in 2023-2028 globally, showing great opportunities that finance vendors can capture.

Domestic payment landscapes in each market evolved rapidly during the pandemic, thanks to the travel restrictions and customers’ hygiene concerns. Post-pandemic, retail and foodservice operators find challenges in serving international visitors, especially difficulties in accepting payments from foreign banking/payment apps or physical cards from foreign network brands.

Businesses in Japan have expended great efforts in diversifying payment methods, from cards to Chinese digital wallets, but there are still gaps to welcome consumers using foreign digital payment (digital wallets, BNPLs, banking apps).

Images of payment methods in JapanTurning challenges into opportunities, key leaders such as Ant Group and UnionPay have been promoting their embedded QR payment solutions, powering their clients’ digital payments on their networks. Together with Razer Merchant Services, Ant Group established partnerships with 7-Eleven in Malaysia in 2023, facilitating payments from users of Kakao Pay (South Korea) and TrueMoney (Thailand), etc. Furthermore, Ant Group teamed up with Dubai Duty Free on AliPay+ in 2023, accepting payments from Tinaba (digital wallet of Banca Profilo in Italy), OCBC Digital (Singapore), GCash (Philippines), etc.

Customers used to mobile ordering (QR) and mobile payment (QR/NFC) find it inconvenient when they are unable to use their preferred payment methods abroad Partnering with Stripe and SUNMI, Oddle has transformed over 200 restaurants in Singapore in ordering and payment, expanding in Malaysia.

Challenges and opportunities

Looking across the four key travel verticals, existing key industry challenges include lack of payment diversity, difficulty in digital transformation of operations beyond payment, universal standard service for most consumers, and labour shortage to provide personalised service to individuals.

Globally, travel industry respondents considered that digital transformation and online sales, AI, flexible payments, and travel disruptions will impact sales in the next five years, according to Euromonitor International’s Voice of the Industry: Digital Survey 2023.

Partnering with international payment aggregators to diversify payment methods with a single integration reduces complexity and improves agility. Vendors with value-added integration services can better support digital transformation of travel businesses, including B2B automated billing and payment collection, inventory planning, real-time analytics and reporting to assist planning including inventory and staffing. Leapfrogging to Generative AI, vendors can assist travel businesses in automated and personalised recommendations in trip booking, lodging, shopping, and dining.

In conclusion, challenges in travel verticals can be turned into opportunities for embedded finance solutions vendors to support travel business partners to transform agilely and stay ahead of the latest travel trends.

Read our report, Embedded Finance Ecosystem: Mapping the Path to Services Industries’ Transformation, for more analysis on how embedded finance is powering transformation in the travel industry through the lens of the customer journey.

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