How ePayments Can Ease B2B Friction In The Travel Industry

While the travel industry remains decimated due to the pandemic, with businesses just beginning to tiptoe toward some semblance of normalcy, the shift to digital processes is gaining traction.

In an interview with PYMNTS, Xavier Ginesta, chairman at Voxel Group, which focuses on B2B payments, said that friction exists for B2B payments within the travel space — but that friction can be eased with eBilling and ePayments.

As he told PYMNTS in an interview done through written exchange, the hospitality industry has long been marked by ever-increasing booking volume; high margins; and relatively high trust between stakeholders.

“This made the need to optimize operational inefficiencies secondary,” he said.

The new reality will be marked by low bookings; tight margins; financial pressures on online travel agents; and the need for cost management.

“This new context provides a great opportunity window to re-engineer the old-fashioned ways the industry had been doing B2B payments in the past, which could have otherwise taken decades to change,” he said, especially when it comes to payments.

Last month, Voxel said its baVel electronic transaction platform (which connects with more than a dozen electronic payment service providers) has been integrated into Juniper, a tech provider for the tourism industry.

And drilling down into existing pain points, as Ginesta told PYMNTS, the most widely used payment methods include payments on credit terms, online merchant payments and commissions.

“Payments on credit terms are probably the oldest form of B2B payment in the travel industry,” he remarked, adding that payments on terms poses a non-negligible risk of not being paid in case the buyer goes out of business.

Payments made on credit also incur significant administrative burden on companies that must reconcile invoices — unless electronic invoicing is used.

“Online merchant payments became popular with the advent of the internet and with them, credit cards have been widely used as a form of dynamic contract,” said Ginesta.

But there can be sources of friction, too, in processing credit card payments through manual means, which can cause inadvertent errors.

There are also inefficiencies tied to chargebacks, breakage and the administrative costs required to fix errors.

“Commissions arise in the dynamic contracting model when the OTA [online travel agency] acts as an agent instead of the merchant of record of the transaction,” said Ginesta.

Delving into the mechanics of the commissions, he said, a guest pays the hotel, and it is the hotel that has to pay a previously agreed upon commission to the OTA after the guest checks out.

“The main pain points in this scenario are due to the fact that the hotels and OTAs’ systems are not synched,” said Ginesta.

When there are cancellations, or late/early checkouts, friction arises as an OTA may expect to see commissions, hotels accruals rise, and there is lack of transparency to the process.

Cross-border payments can exacerbate points of friction, Ginesta maintained, as cross-currency payments are impacted by exchange fluctuations. Those fluctuations mean that OTAs may end up making, or losing, extra money with transactions.

“To mitigate this risk, it is very common for travel companies that operate internationally to implement hedging strategies,” he said.

He said that technology can help relieve some of the pain points of B2B travel payments. In particular, eInvoicing has been widely adopted within travel verticals. These firms (tour operators, for example) may work on credit terms and will issue payments only upon receiving invoices. eInvoicing can streamline accounts payable processes and improve relationships with suppliers.

“An elnvoicing-ePayment closed loop could leverage any form of payment agreed upon between parties (credit cards, bank transfers, digital currencies, etc.) and would virtually eliminate all the inefficiencies that today severely impact the hospitality industry bottom line,” said Ginesta.