Top 4 payment trends shaping the future of online travel agencies

Rahul Jain, CEO and co-founder, Peach Payments

He believes new payment trends provide insight into what OTAs should consider when it comes to the path-to-purchase in their sector.

Trend #1: Upfront payments

It wasn’t until a few years ago that many OTAs and travel aggregators started managing prepayments.

"It used to be that a traveller would make their reservation and the property would handle payment or the guest would pay at check-in. But that comes with the risk that the guest won’t arrive, which impacts occupancy rates and profit margins. This has driven a significant shift towards OTAs that enable and manage upfront payments,” Jain says, “and this comes with some complexities that OTAs need to consider."

These challenges range from working with different currencies to accepting local payment methods and then distributing payments to properties.

In the South African context, almost two-thirds of the country’s international arrivals for the first quarter of 2024 came from the rest of Africa. Jain suggests OTAs looking to grow bookings from these markets will need to consider that credit card penetration is low but alternative payment methods like mobile money are commonly used.

"If OTAs aren’t incorporating alternative payment methods, travellers will choose brick-and-mortar agencies where they can pay the way they want to," he warns.

Trend #2: Frictionless payment options

Travel can be stressful, so making the payment process simpler and more efficient for potential customers sets an OTA apart and reduces instances of cart abandonment at checkout, Jain says.

"India’s Unified Payments Interface (UPI) payment system is an example of what is possible here," he suggests.

UPI allows users to scan a QR code to make a payment. It’s now used by over 350 million people, processing over 75% of India’s digital retail payments.

What’s especially exciting in the travel space is how quickly UPI is being rolled out internationally, allowing users to make real-time payments at the Eiffel Tower in France, or in Mauritius for example. They don’t have to deal in foreign currencies or navigate complex international payments - they just use the same app they use at home.

Jain notes, “Travellers are increasingly demanding ease, and frictionless technologies like UPI are becoming the norm. OTAs should be looking for ways to incorporate them if they haven’t already.”

Trend #3: Multi-currency acceptance

If you’ve ever tried to book or pay for something in a foreign currency, you know the mental maths it takes to convert between currencies. Now imagine an American or European traveller making bookings for flights, hotels and experiences through a South African OTA, having to make conversions for multiple transactions.

"This is where online travel agents that offer dynamic currency conversion stand to benefit," Jain believes.

On the one hand, an easier, more familiar experience will increase sales and conversions. On the other, dynamic currency conversion generates revenue earned through forex margins, which are typically shared between the OTA, the payment processor and banks.

Trend #4: Book now, pay later

The global cost of living increases coupled with an increased desire to travel post-Covid have seen a rise in uptake for book now, pay later travel options.

"People still want to book holidays and travel, but they want to do it in a way that doesn’t create additional financial strain. A book now, pay later option allows travellers to book high-value holidays and travel in advance, and pay it off in instalments," Jain explains.

"This is still an emerging trend, but there is increasing demand for it," he says. "OTAs that offer book now, pay later, open up a whole new market of potential travellers who may not have been able to afford big-ticket items like holidays before."

By their very nature, payments in the travel sector are complex. But technology is making it simpler, giving travellers alternative options that make it easier to book, pay for, or even afford their holidays. Online travel agencies should not be ignoring these options which will help them better serve their client needs, and grow into new markets.