According to the World Travel and Tourism Council, travel and tourism in South Africa is booming and supports 1.5 million jobs across the country.
However, 60% of travel and tourism companies in South Africa identified the cost of cross-border payments as a significant challenge. This makes it difficult for smaller travel businesses to compete with the giants.
Some evident solutions include increased digitisation, automation to reduce manual workload, and greater efficiency for a smooth customer experience for business and leisure travellers alike.
Cross-border payments are a critical aspect of the travel and tourism industry, but they can be expensive and slow to settle.
According to Verto chief executive officer, Ola Oyetayo, travel and tourism industry in emerging markets face unique challenges when it comes to traditional cross-border payments.
“High transaction fees, delayed settlement times, and foreign exchange risks are some of the main challenges that businesses face when processing cross-border payments. Transaction fees can be particularly expensive in emerging markets, making it difficult for businesses to operate profitably. Settlement times can also be lengthy, which can cause cash flow problems for businesses,” said Oyetayo.
Here is how real-time payment systems and digital wallets can help travel and tourism businesses improve their cross-border payment processes and reach more customers, according to Oyetayo.
Challenges for travel and tourism
A survey by the Association of Corporate Treasurers, revealed that 42% of businesses reported that cross-border payment costs were too high, and 36% reported delays in payment settlement whilst WorldFirst also reported that traditional cross-border payment processes can be subject to foreign exchange risks, which can affect business profitability and cash flow as funds get tied up in exchange fees.
According to the Verto CEO, these challenges can hinder growth of the travel and tourism industry in emerging markets, making it essential for businesses to explore alternative payment methods such as real-time payments and digital wallets to help them overcome them.
“By adopting these technologies, businesses can streamline their payment processes and offer a more convenient and secure payment experience for their customers, ultimately driving growth in the industry,” said Oyetayo.
He said that digitally savvy businesses may even want to provide travelling employees with prepaid multi-currency corporate cards as it allows for spending limits to be set, no foreign transaction fees or currency exchange fees – just simple spending, both virtually and physically.
Real-time payments
According to Oyetayo, Covid-19 compelled the travel and tourism industry to adopt real-time payments and instant receipt of funds, whether to an airline, or from an insurance company.
“Real-time payment systems enable immediate, 24/7 transfer of funds between bank accounts, reducing transaction times and the high costs associated with global payments,” said Oyetayo.
According to the World Bank, the global adoption of real-time payment systems has increased from 25 countries in 2011 to more than 70 countries in 2020.
He said that while ensuring businesses and consumers have real-time payment systems that can help to overcome the challenge of slow and unreliable payments, it’s not always a guarantee. Traditional banks with legacy systems can mean delays as payments get held up at various touchpoints.
“Adopting an alternative fintech provider, which promises real-time payments, or the use of digital wallets, which allows for near-instant transfers, affords both businesses and travellers peace of mind. This means that travel and tourism businesses can receive payments quickly, reducing the risk of late payments or non-payments. In addition, real-time payments can help to reduce the risk of fraud, as the transactions are processed in real-time and can be monitored closely,” he said.
Digital wallets
Oyetayo also revealed that digital wallets are also becoming increasingly popular in the travel and tourism industry, as they allow customers to make payments easily and securely from their mobile devices.
According to a survey by Statista, the global mobile wallet market is expected to grow from $1.4 trillion in 2020 to $2.7 trillion by 2024.
In fact, digital wallets were seen as a tool to help boost post-pandemic travel as, in the age of contactless payments in a post-Covid world, a digital solution gave customers greater convenience and meant they could avoid using credit cards.
Digital wallets are the solution to truly touchless travel, as evidenced by a report by Capgemini, which found that the adoption of digital wallets by consumers increased by 12.7% globally in 2020, driven by the Covid-19 pandemic.
“Now, the incentives to use digital wallets stretch beyond convenience into greater safety, flexibility, and for those using multiple currencies without wanting additional fees.
“By accepting digital wallet payments, businesses can offer a convenient and streamlined payment experience to their customers, which can help to increase customer satisfaction and loyalty,” said Oyetayo.
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