Platform Payments

Why Payments Are The Core Of Airbnb’s Meteoric Rise

In less than a decade, Airbnb has gone from startup to hospitality powerhouse, bringing in billions in travel rentals – and that fortune has its foundation in payments. In the latest Payments Powering Platforms Tracker™, powered by WePay, Kapil Mokhat, the company’s director of payments and partnerships, discusses why the company controls its own payments, and how that’s benefitted expansion. Plus, find the latest headlines and rankings of 58 players, including 7 new additions, inside the new Tracker.

In the course of less than a decade, Airbnb has gone from online obscurity to hospitality powerhouse. The platform is now used by travelers to book travel accommodations in more than 191 countries, with payments processed in more than 70 currencies.

The company, launched in 2008, burst onto the scene to become one of the most well-known names in the tech platform space. It’s known for blowing the doors off the hospitality industry by allowing homeowners and apartment dwellers to rent out anything from a spare room with a futon to a treehouse to a mansion to travelers who, for one reason or another, wind up booking with Airbnb rather than a hotel or another more traditional lodging option.

But Airbnb’s reputation as a new kind of travel experience may be a bit of a misnomer. While the platform has certainly transformed how many travelers think about accommodations, the biggest breakthrough the businesses has made may not be in booking, but in payments.

Unlike many platforms or other eCommerce websites, Airbnb processes its own payments in-house rather than outsourcing the job to an experienced processing company. And, much like other eCommerce influencers, including eBay, that history of payment processing has been a key factor in its rise to the big time.

PYMNTS recently caught up with Kapil Mokhat, director of payments and partnerships for Airbnb, to discuss how the company has used payments to build a new kind of hospitality platform.

Building trust from the ground up

When Airbnb launched, payment processing was not the main selling point — in fact, it wasn’t offered at all.

Guests and hosts used the site to find one another and book stays and then handled payment between the two parties outside of the platform. After experiencing the awkwardness this could cause firsthand on a trip to South by Southwest in Austin, Texas, cofounder Brian Chesky implemented PayPal, which enabled guests to pay online but still required Airbnb to deliver checks to hosts, which was a time-consuming process (and, um, checks!). Chesky knew it was only a half-measure, due to that lack of efficiency — the site needed to process payments for both sides of the rental transaction.

As guests and hosts started to ask for alternatives to PayPal and the company continued to grow and enter new markets, Chesky and fellow founders Joe Gebbia and Nate Blecharczyk grew tired of writing checks by hand and within less than a year decided to build their own internal payments operation.

When Airbnb first started to build its own payments processing service in-house, Mokhat said, the goal was to create a system that could build trust between the company and the hosts it depends on. He noted that allowing guests whom hosts have never met into your own home is a remarkable leap of faith — so the team at Airbnb worked to build a system that hosts could trust to pay them reliably and quickly, with money into their accounts the day guests check in to properties.

“Ultimately, the community of people who are renting their homes to guests on Airbnb really need to trust that Airbnb has their back and that they are going to get paid,” Mokhat explained. “We want hosts to be focusing on welcoming them into the home and into the city, not focusing on the payments, because they know [their payment] is going to show up.”

Along with helping to build trust with the homeowners that the company relies on to keep customers checking in, Mokhat said the internal payments system also gives the company much greater control over how the system works, which allows them to construct the payment process to suit the company’s needs.

“We get to customize that experience for our community, which we feel like we know the best [compared to other payment providers],” he explained. “Ultimately, it allows us to take ownership of our own payments roadmap.”

Remodeling the payments process

But while Mokhat and his team’s in-house system may give the company more ownership over their roadmap than going with a traditional payment processor, that map has not stayed the same in the decade following Airbnb’s payments system launched.

He noted that both the company and the payments space as a whole have seen a sea change over the past few years, experiencing tremendous growth as technology unlocks new payments and platform potential. And, he added, the element of control the payments system has provided the company has been a big benefit as it has expanded.

The company has also branched out into other elements of the travel space as well, offering customers the opportunity to make reservations for special events or experiences in a city they are visiting (or live in).

Mokhat said that these types of expansions would be infinitely more difficult without an in-house payments system. But as the company has grown, its needs have also changed, motivating the company to seek out partnerships with established payment providers, like American Express, which has teamed up twice over the past two years with Airbnb for rewards programs and corporate travel.

“From 2008 to now, the growth at Airbnb has been incredible, and it hasn’t been a market-by-market approach — it’s really grown and spread in every direction. With that challenge in front of us, we needed to be able to rethink how to approach payments in a way that worked for us,” he said. “That doesn’t mean we haven’t partnered with others to make it work, but having that control has been key.”

As new payment options and technology like mobile wallets hit the scene and more travelers and hosts alike turn to Airbnb, Mokhat said the company is keenly focused on maintaining those elements of trust and control that have allowed it to grow so rapidly over the past few years.

As the company’s reputation and revenue grow, could Airbnb owe its transformation from fringe online offering into a hospitality power player to payments? Seems like something to ponder from the comfort of a secluded treehouse.

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To download the June edition of the PYMNTS Payments Powering Platforms Tracker™, powered by WePay, click the button below.

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About the Tracker 

The PYMNTS Payments Powering Platforms Tracker™, powered by WePay, serves as a monthly framework for the space, providing coverage of the most recent news and trends along with a provider directory highlighting the key players contributing across the segments that comprise the payments-integrated platform ecosystem. 

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