Tapping ACH, Blockchain Into The Game Of Faster SMB Travel Payments

Entrepreneurial and small travel management firms face a few key points of friction when it comes to payments: the volume of transactions they have to manage and the cost of accepting payments. According to Johannes Koeppel, CEO and co-founder of travel payments company WeTravel, those huge hurdles place a heavy burden on these small firms’ ability to manage cash and, frankly, to operate.

WeTravel offers a payment platform for enterprises that aren’t typically thought of as traditional travel businesses. Take, for instance, a yoga instructor who wants to plan a yoga retreat or a teacher planning a school trip for 200 students.

These scenarios involve many hands in the pot, as Koeppel explained to PYMNTS in a recent interview.

“You don’t normally have just one payment; you have at least two, sometimes five, sometimes 20, sometimes more. For a high school marching band with 200 people making 10 payments each, you’re talking about 2,000 payments,” he explained, noting that oftentimes in group travel, individuals make their payments in installments.

That requires a lot of management on the back end for small travel companies and entrepreneurs that want to coordinate these trips. Transactions in these use cases don’t simply go from Point A to Point B. A yoga instructor, for instance, must collect payments from yoga students and guarantee that she or he will pay the retreat center on behalf of the group. It’s a lot of administrative work, a lot of number crunching and a lot of areas in which payments can go wrong.

For Koeppel, group travel payments present challenges that cannot be solved by credit cards. In fact, he said, they often create even more friction for small businesses because of interchange fees that can tack on a 3 percent processing charge for each of those dozens, or even hundreds, of transactions.

“We’re bringing back the old ACH online payments into the game,” he said, “which normally is only used for mortgage payments or topping up a balance on PayPal or something like that.”

Alas, ACH is a far-from-perfect payment rail, Koeppel admitted.

“The challenge here is, of course, you only get a response a few days later if the payment is complete,” he said, pointing to the lag between ACH processing and settlement, especially in the U.S. He’s enthusiastically waiting for faster and real-time ACH payments to finally arrive in this market too.

“You don’t know if the spender has enough money in their account, and there is a whole bunch that can go wrong on either side of the payment with ACH,” he said. “We would love [real-time ACH]. That would be fantastic. There has been so much talk about it for years, and we’ve been watching it patiently. Especially coming from Europe,” he continued. “It’s incredible how slow it is in the U.S. In England, we can do payments in three hours. Here in the U.S., we sometimes have to wait five business days to know if a payment is complete or not, which is definitely not the way things should be in 2018.”

That delay can have bigger implications for an entrepreneur or a small travel business’ ability to manage cash flows and understand their financial positions, though while it is a “nuisance,” said Koeppel, these companies have been able to handle the lag time because trips are often organized several months ahead of schedule. Still, there are instances in which ACH payments simply cannot be allowed on the WeTravel platform, the CEO said — for instance, if a traveler is already on a trip and wants to upgrade a room.

In that scenario, the platform cannot take an ACH payment because the transaction may not go through until after the traveler has already completed the trip.

As WeTravel plans to expand — the company just announced $2 million in seed funding — Koeppel said the company will be looking to expand capabilities to be able to meet the payment acceptance and processing needs of larger travel management companies, some of which operate in the corporate travel space. For these enterprises, not having the ability to accept payments while a traveler is already on the road isn’t an option.

With that in mind, the company is exploring a few avenues. Koeppel said integrations into existing enterprise resource planning (ERP), accounting and other back-end systems will be key, though he’s not entirely sure whether those integrations will come in the form of application programming interfaces (APIs) or in WeTravel’s development of proprietary solutions and the creation of its own payment rails.

“I can’t go into too much detail,” he warned, though he did highlight WeTravel’s interest in blockchain technology.

“We’re not a blockchain company; we are a payments company,” he said. “But there are two perfect use cases for blockchain here.”

The first is the international nature of WeTravel’s services.

“A lot of our payments have some kind of international component,” he said, whether that be through travelers moving across borders, cross-border payments coming in and going out or through currency conversions. “This is one of the most eminent use cases for blockchain, and something we’re going to look at in 2018 is what kind of public blockchain system is ready for us to tap into.”

The second use case for distributed ledgers targets the point of friction caused by the fact that so many parties are involved in group travel.

“Our platform handles multi-signature contracts,” he said. “We guarantee trust between multiple parties that a contract will get fulfilled. This built-in contract is definitely something where we can see our own ledger or our own token being used in the future. It would allow us to facilitate payments in a more efficient way.”

ACH can address some of the friction associated with group travel payments, and real-time ACH would go even further in that regard. But according to Koeppel, blockchain may come out on top to address the efficiency, speed, transparency and security required for global, complicated, multi-party payments — that is, if regulators get on board.

“The international use case of blockchain is for fees and speed,” the CEO said. “In the U.S., I could definitely see a huge potential in this sense. But we have to see how the regulations pan out. It’s one of the big question marks. Inherently, it’s not technology that slows things down; it’s the regulations, so I’m very curious and hopeful that the regulatory environment worldwide around blockchain technology will not dampen the technology itself. We’re looking forward to these new advances to take advantage of that.”