Innovation

Duffel Funding Round Adds Fuel To Travel Industry Innovation

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Disruption keeps hitting the travel industry, whether via digital payment or commerce, and the latest example of that comes from a U.K.-based startup called Duffel.

According to a new report, the company has raised $21.5 million in fresh funding, capital that will go toward “a B2B offering (that allows) individual travel agents at large online travel management companies and tour operators to offer a ‘seamless travel experience’ to their end customers, making the booking experience simpler, faster and cheaper.”

Details were scarce about the company’s new offerings, or how it views this particular brand of travel-industry disruption. But according to the report, “Duffel appears to be building a new software stack for travel, in the same way that challenger banks started from scratch to make themselves more agile than the laggard, incumbent banks.”

Multiple Payment Struggles

As PYMNTS research has demonstrated, four out of 10 travel operators struggle to manage multiple payment service providers. Not only that, but 82 percent of travel companies innovate to combat the loss of customers, and 36 percent of travel companies expect innovations to decrease costs.

Other areas of innovation and disruption for the travel industry are heavily focused around payments. That includes the payment of airline fares. For instance, in a PYMNTS interview with Universal Air Travel Plan (UATP) CEO Ralph Kaiser, the executive told Karen Webster that among the trends gaining traction with airline merchants is the emergence of point-of-sale (POS) financing. UATP exists as the oldest payments network in the world, having been in service for more than 83 years and serving the global air travel market exclusively.

Paying for tickets — which can, depending on the season and destination, cost thousands of dollars — over months can certainly render them more affordable. Kaiser told Webster that POS financing may prove especially appealing in “less developed countries, where there’s not as much availability of credit or credit cards, [and] where there are more cash transactions. It’s probably going to add a greater population to the traveling public, and that means more people are going to access air travel.” He said POS financing will not displace other forms of payment, but should lead to accelerated activity in the coming years across corridors, such as Central and South America, the United States and Canada.

Payments Cost

Payments costs $75 billion annually for the global travel industry, according to the new PYMNTS Travel Payments Study, an Amadeus collaboration, and 5.4 percent of global travel sales go toward paying third-party payment service providers (PSPs). However, despite all that money, the global travel industry is only now making what the research called the “first cautious steps into its own payment revolution.” Individual consumers are certainly driving many of those changes, but so are businesses that are eager to use the same cutting-edge corporate tools for travel that they use for other forms of B2B transactions.

The challenges facing payments development in travel, while certainly not impossible to overcome, are substantial. Payments innovation, for starters, is an alien concept for many travel service providers, especially in the U.S. and Europe, which are often left to take lessons from payment advances in the Asia-Pacific region.

The PYMNTS-Amadeus research found that only 15 percent of all travel companies have attempted new payment innovations over the last three years, let alone succeeded. That’s not because travel agents and associated service providers lack imagination, nor is the travel industry ignorant of payment technology advances around the world (especially in China, a mobile payments and commerce leader).

It’s because travel industry participants are keenly aware of the costs of innovation — and its often uncertain prospect of returns. As the PYMNTS report put it, “Travel companies, in their inherently international field, understand that being innovative means managing a complex, multichannel and international system that supports not only global card brands and popular digital wallets, but also hundreds of local payment methods. In addition, they must protect customers from fraudsters, whose methods grow more sophisticated by the second.”

Still, the new funding in Duffel provides evidence that disruption and innovation will keep coming to the travel industry, and that upstarts will continue to find and test out new ways to pay and to handle other tasks associated with business trips and vacations.

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Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The September 2019 AML/KYC Tracker Report provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

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