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1、FLYING WITH FINTECH:How Virtual Cards Create an Air Travel Payments Revolution 2 2023 Nium Pte.Ltd.All Rights RAn international dance of crew,machinery,logis-tics,and infrastructure combine to help humans defy gravity.So why have the industrys payment systems remained so stubbornly earthbound?The ai

2、r travel ecosystem requires managing complex payment flows involving many different parties,including travelers,tourism suppliers,and third-party vendors worldwide.Existing processes often lead to high operational costs,errors,and cash flow issuesmany of which fall on online travel agencies(OTAs).OT

3、As face the fundamental problem of provid-ing services on a global scale that require local-ly-tailored compliance and integration to ensure acceptance and manage overhead.However,they also bear a disproportionate amount of the risk.Fintech will transform the way money moves through the air travel e

4、cosystem.Virtual cards give OTAs more control,transparency,and insight into payment processes,reducing unnecessary fees,and maximizing acceptance rates to deliver a consistent,efficient customer experience.Online Travel Agencies 43%Direct 29%Travel Agents 29%IntroductionHow do travelerslike to book?

5、43%29%29%Modern air travel is amarvel of coordination3 2023 Nium Pte.Ltd.All Rights RTaking Off With Technology41%of travelers say they prefer booking via OTAs,while 29%book direct and 29%book via travel agents.However,global travel trends and the lingering hangover of a travel-toxic global pandemic

6、 have put new demands on OTA busi-ness modelsones that traditional payment methods are ill-equipped to handle.In 2022,the Online Travel Agency(OTA)market was valued at over$760B and will grow to$865.5B in 2023 at a compound annual growth rate(CAGR)of 13.6%.Analysts project growth of 11.07%year-on-ye

7、ar from 2021-2028.But the industry also faces significant headwinds in the form of:When it comes to numbers,the worlds travel markets are still recovering from the shock of the last three years,with most regions far from their pre-pandemic peaks,especially regarding the number of travelers.The UN re

8、ports that 2022 travel volumes are at 60%of pre-pandemic figures.The situation is much worse when looking at specific regions.This puts the onus on OTAs to reduce overhead while focusing on delivering a service that can still draw wary travelers back to the skies and wait out government restrictions

9、.One of the most important issues to solve is payments.The systems that drive payments in air travel are inefficient,slow,and expensive,creating friction between OTAs and their partners,partic-ularly airline acceptance.As the industry faces tighter regulation,slim profit margins,and chang-ing consum

10、er preferences,payment innovation is essential for staying relevant,profitable,and flexible.A rise in direct airline bookingsUncertainty and risk in travel conditionsLow margins and high customer acquisition costs High payment costs and limited control 4 2023 Nium Pte.Ltd.All Rights RFinancial solut

11、ions have evolved rapidly in recent years,with consumers and businesses embracing direct payments,automatic reconciliation,virtual cards,and seamless cross-border transfers.These tools enable OTAs to take control of air travel payment journeys to reach more custom-ers,reduce risk and payment costs,a

12、nd offer a better consumer experience.Moreover,theyre also growing in popularity,with Nium issuing 2.8M virtual cards from Jan-May 2023 and 75M in total since 2018.In this guide,well explore:How payments shape success in the OTA ecosystem The regional trends driving change and performance for OTAs W

13、hy new payment systems can drive competitive advantage How to choose the right payment partner for your business75MFrom Jan.to May 2023,Nium issued 2.8M virtual cards and 75M in total since 2018.5 2023 Nium Pte.Ltd.All Rights RThe State of Travel in 2023The travel industry is far from fully recovere

14、d,experiencing one of the most significant business cases of long COVID of any sector.Travel was one of the first major casualties of the pandemic,experiencing what the United Nations World Tourism Organization calls the worst year on record,with international arrivals dropping by 74%.Global revenue

15、 fell 42%,while OTAs in particular saw revenues fall by 60%and EBITDA drop by more than 85%.While volumes and revenues have recovered somewhat from this tumble,the recovery is limit-ed and often highly asymmetrical.Much like sup-ply chains,travel is a tightly coupled industry,and differences in trav

16、el restrictions between origins and destination countries are widespread.The headline figures only tell part of the story data tells a different story on a country-by-coun-try basis,with month-on-month figures varying significantly.For OTAs trying to plan a consistent strategy,the frequent changes i

17、n policy,market conditions,and consumer sentiment present a se-rious challenge in a world where so much is out of the control of businesses.Stakeholders must focus on optimizing systems that deliver certainty for passengers,suppliers,and OTAs alike.TotalAfricaAsia PacificEuropeLatin America&Caribb.M

18、iddle EastNorth America-31.5%-31.3%-55.6%-22.2%-14.2%-25.9%-11.3%201964.4%84.9%34.0%100.2%52.7%144.4%45.5%2021The road to recovery:2019-2022 volumes 6 2023 Nium Pte.Ltd.All Rights RThe OTA Payment Problem While we considered gross passenger numbers in the previous section,other indicators can pro-vi

19、de contrary,potentially misleading information.Pandemic-era restrictions led to severe cuts in capacity,both due to official restrictions and also due to some airline companies folding.Despite showing one of the most robust recov-eries globally,the LATAM region saw 10 airlines ceasing operations sin

20、ce 2020.Risk falls heavily on OTAs,with price changes and global events driving increased volatility,cancella-tions,refunds,and lost revenue.Since the OTA is the single point of contact for booking,payment,and management for all the other stakeholders in air travel(including airlines,hotels,rental c

21、om-panies,etc.)they also bear the cost of payments and the risk of having to manage complex refunds in the event of cancellation.Success for OTAs also comes at a cost.While B,the largest player in the market saw gross bookings increase 26%to$121B in 2022,with revenues up 13%.However,it was not with-

22、out an increase in costs.In 2021,Expedia and B respectively spent 43%and 49%of their total revenue on sales and marketing.The dynamic air travel market is highly sen-sitive to global events,commodity prices,and consumer sentiment.Payments are the lifeblood of all activity.This leads to a low-margin,

23、high-risk business modelone made further complicated by legacy payment structures that put all the responsibility on the OTA to absorb all the cost and risk of being the primary funnel through which money passes.OTAs offer convenience and flexibility to cus-tomers with one-stop shopping for a range

24、of travel products.It can only do so profitibly if it can efficiently and effectively perform transactions across its partner ecosystem at scale.Lacking payment competence,OTAs will burn more cash just to meet expectations.How payments hold OTAs back49%While gross bookings for B increased by 26%,the

25、 company allocated 49%of its budget to sales and marketing expenses effectively increasing its cost-per-acquistion numbers.7 2023 Nium Pte.Ltd.All Rights RResearch suggested U.K.travel operators lost$6.92B in 2022 because of failed payments alone,with an average of 13.4%of consumer pay-ments failing

26、.This has been exacerbated by the inconsistent implementation of card-based SCA across Europe since 2018.Risk also comes in more direct forms.According to IBM,travel and transportation is the second most targeted industry for cybercriminals,with OTAs losing billions yearly to fraud.While this is pri

27、marily a risk for consumer payments,the per-ception can spill over into B2B payments,leading to suppliers leaning on more inflexible payment methods,such as direct bank transfers.Traditional payment methods such as automated clearing houses(ACH),billing and settlement plans(BSP),and cash expose OTAs

28、 to financial risks.In unpredictable situations like the COVID-19 pan-demic,consumers cancel booked and paid trips and request refunds.This causes widespread cash flow issues as these methods provide zero protection for suppliers,as was found by partners working with airlines that ceased operation i

29、n recent years.Payment risk Getting refunds is particularly challenging for OTAs using bank transfers to pay their travel suppliers because refundable bookings are not always honored.When they are,the process can take weeks or even months.Non-refundable bookings are even harder to recover,and some c

30、ompanies are still involved in legal action from cancellations years ago.In a post-COVID world,these OTAs cannot ignore these risksOTA payment strategy must provide structural protections against potential catastro-phe.Card schemes play a crucial role in mitigat-ing risk,with chargeback protection f

31、or undeliv-ered services.$6.96BThe amount U.K.travel operators lost in 2022 because of failed payments alone,with an average of 13.4%of consumer payments failing.8 2023 Nium Pte.Ltd.All Rights RWhen dealing with legacy payment methods,executing and managing large volumes of stake-holder payments to

32、suppliers bring additional cost and resource commitments,directly affecting business OTA profitability.Niums research reveals that payment costs can erode the margin of travel agencies by up to 20%.With the growth in travel volumes,the efficiency problem grows,especially as consumers adopt new payme

33、nt methods.One study found that the number of bookings paid in more than four in-stallments is up 18%in 2023 compared to 2019.Those expectations are particularly significant in APAC,where the adoption of innovative payment methods such as digital wallets and Buy Now Pay Later(BNPL)is high by global

34、standards,bringing additional reconciliation work for finance teams.Air travel requires cooperation and coordination among various stakeholders,but one of the most important relationships is between airlines and OTAs.The competing financial incentives involved in payment processes have created a sys

35、tem where airlines and OTAs suffer from high costs and payment risk,risking working at cross pur-poses.Costs and fees associated with interchange and card acquisition add further friction.The lack of options for payment optimization in traditional for-mats results in airlines and OTAs facing a payme

36、nt ecosystem dealing with surcharges,acceptance issues,fines,and declined payments.The result is a slow,inefficient,expensive ecosystem of travel impacting the customer experience.Back-office efficiency Ecosystem friction Virtual cards offer a valuable alternative that can create a win-win situation

37、 for both sides.Users can create and issue them at a local level,reduc-ing unnecessary fees and giving OTAs the oppor-tunity to propose mutually beneficial scenarios for airline partners and other local suppliers.Working together,OTAs and airlines can eliminate charge-backs,fees,or declined payments

38、 based on broad-brush rules(such as IP or BIN range block-ing)and instead move to a solution that offers lower interchange costs,eliminates cross-border fees,and improves FX rates.Further,to help OTAs manage spend,Nium pro-vides a broad range of merchant category codes(MCCs)that limit how and where

39、the virtual cards can be used.43%20%of OTA margin lostto payment costs.-Nium Research9 2023 Nium Pte.Ltd.All Rights RDiagnosing OTA Payment SystemsOne of the major issues with OTA payment sys-tems is the reliance on a double loop payment process.In this type of system,once a custom-er makes a paymen

40、t to an agent(first loop),the payment then has to pass to each of the relevant suppliers and service providers(second loop).EventReservationHotelCar RentalAirlineOTAConsumerThe double-loop problem 10 2023 Nium Pte.Ltd.All Rights RThe double-loop creates significant challenges for OTAs due to:High pa

41、yment volumes for a range of stakeholders Foreign exchange fees for international trips Flight cancellations and supplier risk Card disputesA complex refund processThe complexities in managing the second loop are further magnified,because three or more vendors may take part in each transaction,incre

42、asing the amount of reconciliation and administration work required for OTAs,reducing visibility,control,and the scope of activity.24%of travel and tourism CFOs say slow pay-ments are a top challenge,with 26%saying that its too complicated to manage multiple vendor relationships.23%say that obtainin

43、g real-time access to sales and transaction data is difficult.24%Of travel and tourism CFO say slow payments are a top challenge.-Nium Research26%Say that its too complicated to manage multiple vendor relationships-Nium Research23%Say that obtaining real-time access to sales and transaction data is

44、difficult-Nium Research11 2023 Nium Pte.Ltd.All Rights RWhat Are the Challenges of Legacy Payment Methods?Traditional payments for air travel rely on longstanding methods that often predate the advent of fully digital payments.While these facilitate the basic action of executing pay-ments,they do so

45、 at the price of efficiency,control,and cost.These legacy methods limit OTAs ability to manage risk,service,cash flow,and scalability.Billing and Settlement Plan(BSP)Offered by the International Air Travel Association(IATA)for facilitating fund flows between travel agencies and airlines.Inflexible a

46、nd doesnt scale well for many modern OTAs.It makes cancellations and refunds difficult,and reconciliation is chal-lenging due to the consolidation of individual payments into lump-sum payments.Excludes many low-cost carriers,a core compo-nent of various travel segments.Automated Clearing House(ACH)U

47、sed for transferring bank payments.Slow and requires manual prepa-ration of NACHA files and batch file uploads.Settlement times take longer,typically 2-3 business days.Some banks impose transac-tion limits,which can cause larger transactions to fail.Physical Debit and Credit CardsTies payments to a

48、singular card number,making transactions unwieldy and vulnerable to fraud.Settlement takes 2-3 business days,and some banks impose transaction limits.High transaction costs for merchant-side.Rewards are limited to geography and the indi-vidual,not the business.Bank statement reconciliation time is c

49、onsuming and ineffi-cient,limiting reporting potential.FX rates are set and controlled by the bank-side,often leading to poor rates.12 2023 Nium Pte.Ltd.All Rights RHow theWorld Pays Just as with other industries,payment trends in travel are heavily impacted by regional trends in legislation,technol

50、ogy development,and con-sumer preferences.In order to maximize market share globally,OTAs must ensure their payment systems align with changing conditions in their target regions.An essential change is a rise in real-time payments(RTP)instead of individual one-off paymentstheres a move toward a cont

51、inuous flow of micro-payments that provide greater flexibility and control for businesses and consumers.For instance,a payment could happen immediate-ly if a service is provided during a trip.If a flight is delayed,insurance can pay out straight away.This represents a significant shift from traditio

52、nal models of delayed reimbursement or compensa-tion.Rapid digital payments are a key goal of EU payment harmonization.Real-time Payment(RTP)is growing rapidly in Europe,with expan-sion projected to continue at a CAGR of 24.3%from 2022 to 2027,driven by centralized systems such as:European Union Pay

53、ments SEPA Instant Credit Transfer in the EU Faster Payments in the U.K.P27 in the Nordic region,the worlds first real-time,cross-border payment system in multiple currencies 24%Projected RTP GrowthRate in EU from2022 to 2027.13 2023 Nium Pte.Ltd.All Rights RAPAC remains the most developed real-time

54、 pay-ments market globally,with Thailand leading the way in volume and economic growth and many of the regions nations operating successful,mature schemes.Other leading countries include Singa-pore,Malaysia,Indonesia,and India,which is now the largest RTP market by volume,in transac-tions worldwide.

55、Real-time payment(RTP)transactions in LATAM are forecast to grow from$33M in 2022 to,repre-senting a CAGR of 29.3%.Latin America is pro-jected to be the region with the highest growth in RTP transactions as a proportion of electronic payments,which will reach a 56%share over the next five years.To e

56、ngage effectively with these growth oppor-tunities in these valuable regions,OTAs will need to implement systems that can streamline their payment efficiency while offering the service that customers increasingly expect.The top three economies in particularBrazil,Argentina,and Mexicoare set to see h

57、uge eco-nomic gains over the next five years,with Argen-tina and Brazil projected to deliver seven and ten-fold increases,respectively,in economic benefits and savings driven by real-time payments.Asia-Pacific Payments Latin America Payments$48.6BThe size of Indian RTP market.$1.2BThe projected LATA

58、M RTP market by 2027.14 2023 Nium Pte.Ltd.All Rights RB2B Payments-Innovation in TravelDue to the high costs associated with credit card and bank transfer payments,the air travel in-dustry has gradually moved towards alternative payment methods.One of the most promising avenues is virtual cards,whic

59、h have the potential to offer a win-win for both airlines and OTAs,with significantly reduced risk for all parties.Core advantages of virtual cards include:Improved efficiency and reliabilitySingle-use virtual cards tie the customerof the booking to the payment in a-oneto-one relationship,enabling f

60、astertransaction reconciliation,minimizingthe risk of errors,and streamliningpayment processes.The increasedefficiency and reliability reduce acquirerrisk,giving greater confidence to allparties in the distribution chain.Automated processesVirtual cards are highly automatable,reducing the need for m

61、anual intervention.This automation includes the reconciliation process,saving significant costs and operational effort for OTAs.End-to-end controlOTAs can customize their own specificparameters,such as the amount,the payee,and the time of payment,enhancing control over businesscash flow.SecurityVirt

62、ual cards are inherently more securethan traditional plastic cards,with unique card numbers for each transaction,reducing the risk of fraud.Cost savings and FXLocal issuance enables OTAs to reduceFX costs at the local level,streamliningacceptance for suppliers to improvemargins and cash flow.Risk re

63、solutionIf a merchant doesnt provide thepromised service,businesses can claimrefunds via the card dispute chargebackprocess,providing an additional layerof protection.15 2023 Nium Pte.Ltd.All Rights RThe industrys appetite for VCC solutions is growing.Ninety-four percent of travel agents,90%of hotel

64、s,and 86%of airlines believe they will become an essential payment method.In APAC,48%of corporate travel agents intend to introduce virtual payment tools inthe next 12-24 months.There is also strong evidence for the mutually beneficial nature of virtual cards,with 76%of airlines agreeing that virtua

65、l payments benefit both the travel provider and sellers.OTAs gain better control,reduce fees and risk,while 74%of airlines realize cash flow improvements from shorter VCC settlement cycles.The result is that 98.3%of virtual card payments are now accepted by airlines.To realize the full benefits of v

66、irtual cards,the systems behind their implementation need to deliver the necessary control and visibility while operating at a level of speed and cost that enables OTAs to soar.75MNium cards issued worldwide16 2023 Nium Pte.Ltd.All Rights RA Virtual CardBuilt for OTAsNium is the global leader in rea

67、l-time money movement,with a global presence based on local rails,implementation,and compliance.Combining technology with tailored support,Nium is one of the fastest-growing VCC travel providers with a physical presence around the world.This enables Nium to offer a wide range of prod-ucts,hosting pa

68、rtnerships,and geographies to deliver customized payment strategies specific to the markets that customers operate in,based on detailed local knowledge and reliable systems.Nium virtual cards create a more equitable,sus-tainable,and future-proof model for OTAs and their network of suppliers,using UA

69、TP authori-zation rails coupled with fast settlement times and complete visibility.Nium works directly with customers to leverage a global license network to build better relationships with suppliers at all levels,helping OTAs build tailored solutions.Advantages for OTAsHigher acceptanceChoose from

70、a range of solutions,from virtual cards to Niums Airline Payment(NAP)tools,offering 100%acceptance for airlines.Local controlIssue payment methods on a local basis to maxi-mize efficiency and reduce fees.Seamless experienceRobust APIs deliver rapid responses in under a second,reducing customer timeo

71、ut risk.Efficiency and reportingTravel agencies maintain the reporting and reconciliation efficiencies already offered by Nium Travel Payments;meanwhile,participating airlines receive an aggregated statement and a transactional statement on funds received,including PNRs,for ease of reconciliation.In

72、terchange cap protectionReduce margin erosion risk by pre-empting regulatory changes.Value-based relationshipsImprove relationships with merchants and airlines with faster settlements and clear processes.Faster rebatesImprove cash flow with rebate collection on a daily basis,instead of monthly or qu

73、arterly.17 2023 Nium Pte.Ltd.All Rights RHow Nium Can HelpReach Out to Learn MoreNium has worked with leading institutions across the world to gain access to a number of the lead-ing real-time payment networks.Using a secure,modular API suite,global businesses can access fully compliant payment rail

74、s,with regulatory licenses and authorizations in over 40 countries,enabling seamless payment acceptance regard-less of geography.To find out how Nium payments solutions can future-proof your business,visit to book a consultation with one of our travel payment experts.Contact usPAYOUTPayout in more t

75、han 100 currencies to over 190 countries,100 in real-time.RECEIVE FUNDSReceive funds in 33 markets,including Southeast Asia,the U.K.,Hong Kong,Singapore,Australia,India,Latin America,and the U.S.COLLECT FUNDSCollect funds in local payments,hold in a virtual wallet,and payout in local currencies in 35 countries.ISSUE CARDSAccess physical and virtual card issuance in 34 countries,including Europe(SEPA),the U.K.,Australia,and Singapore.HIGH-PAYMENT THRESHHOLDSReceive high-payment funds in wallets,accounts,or to cards around the world.