The travel industry has a long, arduous path ahead, and it's unclear what the sector will look like as it endures a painful period of disruption.
When consumers will feel comfortable flying, or whether corporates will still find value in business trips after teleconferencing for months, remains to be seen.
Despite the gloom, there is room for optimism as markets begin to cautiously ease travel restrictions. Regardless of what the future holds, the travel industry will need to adapt, and changes won't only occur on the front end.
Back-end processes like payments and cash flow management are a significant opportunity for travel industry players to modernize and promote efficiency. Speaking with PYMNTS, PayParc Global Solutions Founder Taylan Taspinar discussed the sector's dire need to upgrade its B2B payments strategy after a yearslong lag in innovation — and why not just data, but industry-specific data, is essential to combatting friction.
A World Of Pain Points
According to Taspinar, it's overdue for the travel sector to embrace B2B payments digitization.
"The travel industry is indeed very good in adapting to new technologies in general, and there are incredible players that are bringing innovations to the industry," he said. "However, it is strange that in terms of payments, not much has been done in the last few years since the appearance of the virtual credit card."
While virtual cards are a step-up from legacy, manual payment tools like direct bank transfers, they aren't without their own challenges, particularly as the payment needs of travel industry players become more complex. Taspinar pointed to high costs, long settlement times and the need for manual intervention as some of the biggest B2B payment pain points in the space, and as some of the reasons why, he said, "the travel industry was already late to benefit from the innovations offered by the current FinTech revolution."
With the global pandemic all but shuttering operations for many industry players, including buy-side firms like online travel agencies, and industry suppliers like hotel chains and wholesalers, the pressure to optimize payment flows has grown even more intense.
Taspinar explained that the pandemic has led insurance providers to withdraw from the travel industry and pull back coverage for sellers' receivable exposures. This has led such vendors to require bank guarantees or "significant bank deposits" in order to agree to do business with someone.
"This resulted in a freeze of a huge number of business relations in the travel industry," he said. "So not only the cash is shorter than ever, but the risk is higher than ever as well, which makes the circumstances even worse for travel companies."
The Journey Ahead
While virtual cards and other electronic payment methods can support accelerated transactions and cash flows for industry players, they are not able to address the industry-specific concerns of today.
To optimize B2B payments while also supporting corporates' working capital needs, PayParc built a proprietary payments platform to authorize and settle B2B transactions, with funds moving into firms' PayParc digital wallets in real time.
Transaction speed is particularly important for this space as vendors need access to funds as quickly as possible. Instant payments are emerging as a "necessity" for the travel sector, said Taspinar, adding that the company aims to mitigate the risk that has ballooned in this space in recent weeks by negating the need for insurance coverage or prepayments.
Augmenting this strategy is data, which is becoming a critical component to optimizing B2B transactions both in the travel industry and elsewhere. It's also, however, one of the biggest hurdles of B2B payments, with a lack of standardization and integration preventing many buyers and sellers from seamlessly accessing the data they need for reconciliation, settlement and analytics.
For PayParc, this was an opportunity to wield not just data, but industry-specific data, to optimize travel B2B payments. Transactions are initiated by booking data, and funds can be moved between wallets based on booking details, payment date, cancellation policy or other factors. By combining this kind of industry-tailored data with broader transaction information, both buyers and sellers can streamline workflows like reconciliation, noted Taspinar.
With so much uncertainty plaguing the travel arena today, organizations can no longer afford to rely on outdated payment methods that require manual intervention. The potential for more rounds of lockdowns could add salt to the wounds and further limit cash flows for businesses in the sector, but as Taspinar said, innovation is essential.
"We need to find solutions as quickly as possible under the current circumstances," he said. "We believe it is the only way to adapt and survive today."