Currencies as a profitable payment method

Travel B2B and B2C distribution companies find themselves at the crossroads of two powerful trends. On the one hand, surveys detect an overwhelming desire —on the part of customers— to purchase travel in their own currency. Call it the ‘currency imperative’. 

On the other hand, bed banks, flight consolidators and OTAs are rushing to experiment with new payment methods. This is the ‘Fintech imperative’. Capitalising on these two trends is a way for travel companies to enhance their customer experience profitably. 

Can they pull the trick? Yes—but only by taking a broad view of Fintech, one that goes beyond pure payment solutions like Buy Now Pay Later (BNPL) and instant payments. The solution is to treat currencies themselves as a (very profitable) payment method.

An overwhelming preference: the currency imperative

The Travel Trends 2024 Report shows that 75% of travellers say it is important to be able to purchase travel in their local currency. This percentage is much higher for Asians, as 81% of them desire to purchase travel in their local currency, compared to 71% of Europeans and 72% of North Americans.

A survey by Amadeus provides the clearest expression of Travel’s currency imperative as expressed by customers:

• 71% spend more when shopping in their own currency

• 74% are concerned about the final bill when buying outside of their own currency

• 80% prefer to shop in their own currency

• 84% prefer to pay in their own currency

These data points display, in no uncertain terms, customer preferences for using their own currencies as they shop, contract and pay for their travel experiences. For companies, satiating this currency preference should be a top priority—today’s business ecosystems are centred around customers as the key drivers of the economy. 

Stealing the show: payments and ‘Fintech’ imperative

Running in parallel with the currency imperative is an equally powerful trend: the ‘fintechisation’ of the Travel industry. The aim, as Montréal-based travel app Hopper.com puts it, is to “improve traveller experience while unlocking new revenue streams.” Features like frozen prices and travel insurance are increasingly on display.

Payments solutions, however, steal the show. Embedded payment gateways to increase security and improve the guest experience are all the rage at cloud-based property management system companies (PMS) like Mews. Other popular solutions include Buy Now Pay Later (BNPL) and instant payments.

The trend shows no signs of abating. According to ACI Worldwide, 90% of travel firms are "taking fintech and payment as a priority", with Buy Now Pay Later and fast payments as the most widely considered new payment solutions.

Instant payments deserve a mention. They are seen by many SMEs in the travel space as a way to achieve a healthy balance sheet while improving convenience, risk management and cash flow. A recent survey by PYMNTS finds that:  

• More than 8 in 10 hospitality SMBs send instant payments, and more than 4 in 10 use an instant payment method most to send payments.

• 79% of hospitality SMBs expect to send more payments using instant payment options, among those that currently use instant payments

• 42% of hospitality SMBs cite an instant payment option as their most used method to send payments

• 47% of hospitality SMBs generating more than $1 million in annual revenue cite an instant payment option as their most used method to send payments.

“Not so fast”: a reality check

Will instant payments take Travel firms to the promised land, where the currency imperative meets the ‘Fintech’ imperative? Not so fast, says US Federal Reserve Board member Christopher Waller. Mr Waller is on a mission to downplay some of the hype regarding financial innovation in the global economy, like crypto assets and CBDCs. 

In a recent speech at the Global Fintech Fest in Mumbai, the central banker threw a dose of cold water into the near-term possibility of interlinking fast payments systems across the world. From a technical perspective, achieving such interoperability does not seem to pose insurmountable challenges. A case in point: the incorporation of the Danish Krone into TARGET Instant Payment Settlement (TIPS), scheduled for April 2025. 

The problem lies elsewhere. The “legal, compliance, settlement, and governance challenges” are a harder nut to crack. Slowing down the speed at which payments are cleared and settled may help banks prevent money laundering and counter the financing of terrorism, detect fraud, and recover fraudulent or misdirected cross-border payments.

Casting further doubts on the seamless globalisation of instant payments is the interplay, inside each country, between governments and the private sector. In some countries, Mr Waller remarks, the central bank has the authority to mandate participation. This happens in Brazil with the Pix system.

However other countries display different institutional arrangements. This only adds to the list of practical difficulties regarding the possibility of quickly linking fast payment systems across the globe.

Currencies as a profitable payment method

Here’s a bold statement: Travel’s fixation with payments is hindering participants from taking advantage of the most commercially successful solution of all: currencies. The perception of FX as a hindrance and impediment to doing business is badly misplaced. Instead, treating currencies as a profitable payment method opens up many opportunities.

Thanks to Multi-Dealer Platforms such as 360T, corporate treasurers can execute trades —in favourable liquidity conditions— in the currencies of a number of small, but well-managed economies: SEK, NOK, CAD, AUD, NZD, SGD and KRW. This allows finance teams to expand the range of currencies used in day-to-day commercial operations. 

FX-oriented Fintech solutions go way beyond currency trading. Companies can automate currency management-related tasks such as pricing, risk control and governance in ways that were previously unthinkable.

Importantly, these solutions can handle any number of transactions and currency pairs—a key feature in Travel. And they provide managers with the tools they need to: 

• Sell in more currencies: In both B2B and B2C setups, participants can confidently sell in more currencies and optimise FX markups per client segment and currency pair while reducing cart abandonment and improving credit risk.

• Buy in the currencies of suppliers: In B2B, Travel operators can buy in the currency of suppliers to avoid FX markups, while taking advantage of interest rate differentials between currencies to reduce contracting costs and profit from mispricing opportunities.

• Centralise FX management: Large bed bank operators can centralise FX management to reap the benefits of optimising exposure netting, obtaining better terms from banks and providing 24/7 liquidity to their own subsidiaries.

That’s how, by simultaneously tackling the Fintech and the currency imperatives, bed banks, flight consolidators, OTAs and airlines can square the circle of becoming more customer-centric—in a profitable manner.