66 percent of travel companies are seeing their profit margins impacted by outdated or complicated payment systems, with nine in ten expected to prioritize modernizing their financial operations this year, a report said Tuesday.

According to a report released by leading global payments and financial platform, Airwallex, and travel research company, Skift Research, the travel industry is also being challenged by shifting payment preferences since the COVID-19 pandemic.

While revenue from cross-border payments is on the rise, the unprecedented diversity of payment methods in different markets complicates transactions for 70 percent of travel companies.

Meanwhile, the report showed credit cards, debit cards and digital wallets remain by far the most common customer payment methods.

However, travelers are increasingly using local payment methods or peer-to-peer payment apps, which can vary widely by market.

According to the report, 88 percent of travel executives agreed that there has been a shift in how customers prefer to pay since the COVID-19 pandemic.

Local payment methods or peer-to-peer systems are also rapidly gaining popularity, especially in Asia

Handling a variety of payment types, across different markets, is becoming increasingly complex for 70 percent of travel companies.

The report also showed cross-border transactions are now commonplace with nearly 40 percent of travel executives reporting half of their revenues to be from international customer payments.

Meeting different market payment needs, foreign exchange (FX) fees, and managing multiple supplier and vendor payments in numerous countries hinder travel companies’ ability to expand their supplier or vendor network in new markets.

According to the report, 75 percent of travel companies earn more than one-quarter of their revenue from cross-border payments, while 88 percent of companies frequently make payments to suppliers or vendors in foreign currencies.

Besides, 67 percent of executives agreed that cross-border payments have become more complicated due to the volatility of FX rates.

Managing multiple supplier and vendor payments in different countries using existing payment and financial infrastructure and reconciling bookings, payments, commissions, and refunds data is a key challenge for more than 50 percent of executives.

Challenges with payment systems, such as multi-currency payments and settlements, fraud risk and other operational inefficiencies are impacting travel companies, said the report.

According to the report, nearly two-thirds of travel finance executives say that outdated or complicated payment systems are directly impacting their organizational efficiency and profit margins, with nine in ten reporting at least a 2 percent erosion and over one-third losing 10 percent.

Meanwhile, 90 percent of travel executives are prioritizing upgrades to payment and financial operations systems.

The report also showed 80 percent of executives would be interested in an all-in-one payment and financial operations platform.

“As global travel continues to boom, travel companies increasingly rely on quick and seamless cross-border payments to surpass customer expectations at every touchpoint,

“However, our latest study shows that slow and outdated payment processes are increasing the cost of moving money internationally, which is eating into their profits – modest at the best of times,” said Jack Zhang, Co-founder and Chief Executive Officer at Airwallex.

According to him, modernizing their financial operations with a unified and scalable payment solution will be critical to reducing the cost and friction associated with managing cross-border transactions.

“For smaller players, this can be what levels the playing field, enabling them to compete with larger, more established counterparts,” he added.

Skift and Airwallex surveyed 473 travel executives in April 2024 across seven global markets — Australia, China, Hong Kong SAR, Israel, Singapore, the United Kingdom and the United States.

The survey respondents confirmed that they make decisions about payment processes and financial operations for a travel company across the sector including online travel bookings, travel operators, tours and activities, and destination management.

“Our survey of global travel executives uncovered new, unique, and even surprising insights into why unified payment and financial systems are critical in meeting today’s traveler expectations,” said Rafat Ali, Chief Executive Officer and Founder of Skift.

Amid an unprecedented rise in international tourism, he noted the report intends to give travel companies a framework to expand their knowledge base and build more efficient, effective, and profitable businesses through modernized payment and financial operations systems.

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