Travel is one of the world’s biggest and crucial service industries in modern times. Statista predicts the sector will be worth US$1,015.60 billion by 2027, while 74% of total revenue will be generated through online sales. The introduction of open banking in 2018 changed the face of many industries and has impacted consumers around the globe. Similarly, it can prove to be a useful tool for the travel sector. Airlines, hotels, rental car companies, cruise lines, OTAs (online travel agencies), marketplaces and other travel service providers should all benefit from open banking to stay competitive and thrive in a digital age.
In this article, we focus on how travel service providers can make the most of open banking technology so they can offer an enhanced user experience, reduce transaction costs, improve security, get access to rich bank data, streamline refund processes, and so much more.
It all starts with security
First things first. In the world of money, safety is paramount. While traditional payment methods may be susceptible to bank details or requisite theft, open banking ensures 100% security of end users’ bank data and payments. When paying through open banking, also known as account-to-account payments, users must identify themselves through strong customer authentication (SCA), which requires at least two authentication factors: password, OTP, fingerprint, and face ID. As a result, authentication and payment authorisation can be performed in a user-friendly and secure manner.
Boost the payments’ tempo
Time is of essence in today’s fast-paced world. As much as companies want quick settlements, customers want immediate refunds. Using open banking payments is a win-win situation for the travel company and the traveller since both the payments settlements and the refunds are processed in no more than seconds. This results in improved customer service, as companies can respond quickly to customer requests. In the current economic climate, this is essential for companies to stay competitive and successful.
Putting an end to chargebacks and cutting costs
It is undeniable that faster settlements and high security are great benefits for travel companies. Cost-effective transaction fees and zero chargebacks are also key advantages of open banking. In contrast to traditional card payments, open banking payments are not subject to interchange or card scheme fees since they are not processed through a traditional card network. It is estimated that travel merchants save up to around 90% on payment processing fees when using open banking over traditional payment methods.
Chargebacks are another reality when it comes to traditional payments. Airlines and travel merchants experienced a significant uptick in disputes and chargebacks during the pandemic, underscoring the high cost of reversing charges. Chargebacks cost travel merchants 1.6 % of total revenue, according to an article from justt.ai.
In stark contrast, open banking payments eliminate fraud, reducing substantially the number of chargebacks as customers have passed the SCA and providing more peace of mind for both merchants and customers.
Reconciliation made easy
Reconciliation is yet another thorny challenge facing the travel industry. Accounting teams at travel companies have trouble comparing data from multiple data sources and in different file formats, spending significant time and resources on manual reconciliations and error investigations each year. Open banking makes it easy to automate and optimise the entire reconciliation process. The auto-match function brought by open banking speeds up reconciliation by automatically matching bank transactions with statement lines using default and user-custom rules. Once identified, errors can be quickly corrected.
A final note
A world of possibilities awaits the travel industry through the implementation of open banking. While the technology is relatively new, it offers a host of exciting applications for the travel and hospitality industries. The streamlined, secure, and cost-effective nature of open banking transactions can enhance the user experience, lower costs, improve security, and provide valuable data insights to travel platforms. As such, open banking payments offer a significant advantage to the travel industry and should be seriously considered to maximise the benefits for both customers and travel platforms alike.
For this to happen, travel agencies need a reliable and trusted open banking partner. With advanced security protocols, modern API and comprehensive customer support, Salt Edge provides an unparalleled open banking experience to benefit your business. The company enables connectivity with 5,100+ financial institutions in 50+ countries, and within its Open Banking Gateway, it offers Account Information and Payments Initiation for both PSD2 licensed companies as well as those who do not have a licence nor plan to get it. As an ISO 27001-certified company, Salt Edge uses the highest international security measures to ensure customers’ information safety.
This article was written by Erica Virlan, Vice President at Salt Edge and is published with permission.