Fintech has already made its mark in banking, insurance and several other sectors. Now the time has come for Financial technology to spur new approaches especially in the Business to Business (b2b) segment. Travel agencies can use Fintech to streamline their systems and build more efficiencies.
Travel Business can boom with Fintech
Technology has already changed how we travel around the world. Gone are the days of paper tickets and in most cases boarding passes. Online booking portals have already made it possible for travellers to comparison shop from the comfort of their own homes. Innovation in mobile technology means that we can get a ticket anywhere while on the move at any time. Some of the greatest innovations in travel technology have been in the way we pay for our travel. While in the past the only way to get a ticket was to actually walk into a travel agency and pay for the ticket with cash, check or a card, today we simply make electronic payments with ease.
Amadeus: High Volumes and Low Margins
Amadeus is a travel technology giant which operates in 195 countries and is known for investing in innovative areas especially in Research and Development (R&D). Recently Amadeus announced that they would be partnering with MasterCard and Ixaris to bring a B2B wallet prepaid product to the market.
The travel business is fiercely competitive and Amadeus and its partners are using their B2B wallet approach to cut costs. Amadeus’ Celia Pereiro, Head of Travel payments said in a press release regarding the demand for such products:
“By combining the strengths of Amadeus, MasterCard and Ixaris, we bring flexibility, efficiency and confidence to travel agent B2B payments. Since we launched the product in February we have seen overwhelming demand for it and today have customers in 10 European countries.”
We at Cointelegraph talked with Alex Mifsud, Founder and CEO of Ixaris Technologies, the partner of Amadeus in the B2B wallet and he says:
“Online travel is a dynamic and fiercely competitive market with high volumes and low margins. With supplier networks that span the globe - including hotels, airlines, and cruise operators - the complexity and costs of payments is high which eats into already thin margins.”
Fintech will help drive costs down
Amadeus has already announced the release of its B2B product in February and is now offering travel agencies the option of either saving cash or earning while paying their travel provider partners. Hany Fam of Mastercard Enterprise said in an Amadeus press release that the B2B product has given travel agencies ‘host of reasons’ to leave cash, check and other payment mechanisms behind.
We asked Alex Mifsud about how Fintech can help the travel industry and he remarked:
“Fintech, and payments tech in particular, is playing an important role in driving growth and improving margins for many online travel businesses. Optimising payments through technology, such as we’ve just announced with Amadeus, has the potential to reduce payment-related costs - which can amount to 20% of profit margins - to near zero, bringing a welcome boost to an OTA’s profitability.”
It seems what has already happened in the Business to Consumer sector in the travel business is now playing out in the B2B sector. If travel agencies can cut their payments costs, they are able to actually earn more in an industry where margins are razor thin. Fintech has a special role to play here and the B2B wallet product offered by Amadeus and its partners is an interesting offering to watch out for. Rest assured no one needs checks - for anything.
Travel industry impact
The travel industry has a huge impact on the world economy, In 2015 travel and tourism contributed a total of US$ 7.2 trillion to the world’s GDP which is nearly 9.8 per cent of the global GDP according to a report published by World Travel and Tourism Council (WTTC). This sector is poised to outperform the rest of the global economy in all of the next decade and will grow at a projected 4 percent on average annually. The growth in 2015 alone was at 3.1 per cent and we have been in the 6th positive year of growth for the industry. 1 out of every 11 people work in the travel and tourism business.