4 questions around the fintech and payment revolution in travel
- July 2022
- Phocuswright Research
Fintech services can help add additional value to the travel brand and provide differentiated services from the competition. According to Phocuswright’s latest travel research report The Fintech and Payment Revolution in Travel, the bottom line is that today's consumer wants more flexibility and simpler processes for their travel planning, booking and reconciliation. Those companies who can leverage big data and AI techniques such as machine learning are pushing the entire industry to embrace this fintech revolution. As the customer becomes accustomed to greater flexibility in booking and reconciliation, the entire industry will need to embrace fintech solutions just to remain competitive. Here are 4 questions around the fintech and payment revolution in travel.
What is Fintech and How is it Applied to Travel?
The broad category of fintech describes any software application that involves financial services such as payments, loans, settlement and insurance. Within the travel industry, fintech generally concerns applications that reduce processing costs, provide traveler flexibility, or minimize friction in the reimbursement of expenses for business travelers.
What Technologies are at the Heart of Fintech solutions for the Travel Industry?
At the heart of many modern fintech solutions is a big data solution. The key is the ability to address business problems that were previously unreachable. The latest fintech analytics solutions drive predictive algorithms that can estimate whether prices will go up, or the types of charges found on a typical hotel folio that need to be classified into the appropriate categories. Without massive data sets and new computing tools, such fintech innovations would not be possible. This poses a warning for those lacking the resources to tackle big data: without the proper skillsets, some may not succeed with fintech's offerings, no matter how appealing.
An End to Expense Reports?
There has long been yearning for a simplification of the business expense tracking process. Automation seemed a far-off pipe dream in this context. Finally, these foundational building blocks are driving fintech innovation in expense reporting. A key catalyst for this effort has been the emergence of virtual cards - credit cards that assign a unique, 16-digit number tied to a single travel transaction and issued for a specific dollar amount, limiting the exposure of funds.
Is There More to Come in the Travel Fintech Revolution?
Companies like Hopper and TripActions are tackling solutions around pricing flexibility and payment/expense reimbursement, respectively. If you ask someone in the financial industry about current innovations in fintech, many will point to the emergence of decentralized finance (DeFi) enabled through blockchain technology. The goal of DeFi is to attack the foundational banking fees that add costs to all types of purchases while simultaneously providing rates of return not currently offered by traditional financial institutions. These types of innovations are just emerging in the travel industry and have the potential to eliminate costly banking fees long plaguing the industry.
This article is part of a content series that explores some of the most significant technology-driven trends that will influence travel distribution in 2022 and beyond. Subscribe to Phocuswright Open Access to read the full article and understand how travel companies like Hopper, TripActions, Booking.com, Grab, AirAsia and more are utilizing fintech to better serve their customers. In turn, your travel brand can learn how fintech can better serve your customers or segment. It all starts with Phocuswright research.