Travel and tourism are driving growth and employment across the world. By 2033, the industry is expected to be worth US$15.5 trillion and account for 11.6% of the global economy.
Travel is a particularly strong growth engine for developing markets across Asia and Latin America, where new destinations are growing in popularity and the emerging middle class is discovering travel for the first time. The opportunity for the travel industry’s merchants has never been bigger.
To truly take advantage of this growth, merchants will need to meet consumer expectations, providing reliable and seamless payment systems, particularly for online sales, which will account for 74% of total revenue by 2027.
There are three building blocks which will help travel merchants deliver on these increasingly high consumer expectations: security, convenience, and reliability.
Improving security in growth markets
For spending power to be fully unlocked, consumers must know their data and financial information are secured when making online transactions. If payment gateways are not trusted and consumers decide not to risk a purchase, merchants lose out.
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In recent years, as Mexico’s tourism sector flourished, and with more travellers exploring locally, a 2023 PayPal study found that 63% of Mexican travellers worry about the security of their card details when making online payments to local merchants. A further 34% feel that merchants do not offer a wide enough range of payment options, and 82% expressed that they would opt for payment with digital wallets if merchants offered them.
Digital wallets like PayPal offer consumers an added layer of protection for their card details, which can provide the psychological security needed for them to complete a purchase. As travel e-commerce booms in developing countries like Mexico, better cybersecurity will be indispensable to the sector’s growth.
A business that focuses on eliminating all fraud itself is not sustainable in the long term. Without intelligent fraud management tools, customers would theoretically have to complete time-consuming security checks. If this is the case, you risk losing your customers to a competitor with a simpler shopping experience.
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Intelligent fraud management tools are powerful ways to weed out those bad actors and keep businesses in control of their systems.
Providing convenient and consumer-centric payment options
Many businesses are looking to expand their customer reach into new global markets, but each market has its own payment preferences. It’s up to businesses to cater their checkout experiences to each specific market.
When available payment methods are not suited to consumers’ lifestyles and financial management needs, they will abandon their shopping carts. A 2022 study found that 43% of Japanese consumers would switch merchants if their preferred payment methods were unavailable, while 20.2% would stop shopping entirely.
In Japan, most payments for big-ticket items such as plane or bus tickets have traditionally been paid by credit card, advance payment, or cash. This is less than ideal for a burgeoning class of Gen Z travellers, who have less disposable income and are more budget-conscious.
Buy-now-pay-later (BNPL) platforms such as Paidy are growing in popularity because they allow younger travellers to pay in interest-free instalments.
Merchants who accept new payment methods like BNPL in response to evolving preferences stand a better chance at capturing new segments of consumers and winning their loyalty.
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Improving reliability and authorisation rates
To sustain long-term growth, services must not only be secure and convenient but also reliable. The transaction authorisation rate can be a barometer of their success. Businesses want to deliver top-notch customer experiences that enable more successful transactions without incurring incremental fraud and chargebacks.
Authorisation rate is the percentage of transactions that successfully complete a checkout process. High auth rates mean more transactions are approved. This drives incremental revenue and encourages repeat customers. For a large business, a change of a few basis points in its authorization rate could result in up to millions in additional revenue. Think of what that additional revenue could fund: a new project, more product development, or global expansion.
A 2021 PayPal study found that 44% of falsely declined shoppers stopped or reduced shopping with that merchant.
The path ahead
The world is open for business like never before. Businesses with ambitious growth plans are seeking payment orchestration services – the management of a business’s entire payments ecosystem through a single application programming interface (API) integration. Today, businesses are advancing their road maps while staying mindful of costs.
To truly ride the wave and not just tread water, merchants must always prioritise consumers’ security, convenience, and experience so that everyone can enjoy the economic benefits of world travel.
Samba Natarajan is the SVP for Growth Markets at PayPal
