A new report by global payments firm Airwallex and Skift Research reveals that 66 percent of travel companies worldwide are experiencing reduced profit margins due to outdated payment systems.
The study indicates that 90 percent of these companies plan to prioritise upgrades to payment and financial operations systems over the next year.
The report, based on a survey conducted in April 2024 with 473 travel executives from seven global markets, highlights that 70 percent of travel companies find cross-border payments increasingly challenging due to the diversity of new payment methods.
While revenue from cross-border payments is on the rise, the unprecedented diversity of payment methods in different markets complicates transactions for many companies.
The survey participants also provided insights into the financial challenges faced by the travel sector, including the complexities of handling various local payment methods and managing foreign exchange fees.
They shared 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.
The findings provide a unique perspective on the financial challenges and opportunities that companies face as they grow and operate on a global scale.
This shift has added complexity to the financial operations of travel companies, with 88 percent of executives noting the change in payment preferences since the COVID-19 pandemic.
Local payment methods or peer-to-peer systems are also rapidly gaining popularity, especially in Asia.
Moreover, 75 percent of travel companies report that over a quarter of their revenue comes from cross-border payments, with 88 percent frequently making payments to international suppliers or vendors in foreign currencies.
However, 67 percent of executives find cross-border payments more complicated due to volatile exchange 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.
The study underscores the need for travel companies to upgrade their payment systems to improve efficiency and profitability.
Almost two-thirds of travel finance executives believe that outdated systems are directly affecting their profit margins, with many reporting at least a 2 percent erosion in profits.
Jack Zhang, Co-founder and CEO at Airwallex, said,
“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.
Modernising 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.”
Rafat Ali, CEO and Founder of Skift said,
“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 traveller expectations.
Amid an unprecedented rise in international tourism, the report intends to give travel companies a framework to expand their knowledge base and build more efficient, effective, and profitable businesses through modernised payment and financial operations systems.”
