Around two-thirds of Australian travel companies have seen their profit margins impacted by inefficient or complicated payment systems, research by Airwallex and Skift reveals.
Studies conducted by financial platform, Airwallex and travel research company, Skift, found the Australian travel industry is facing cost challenges through inefficient processes with cross-border payments.
The survey conducted in April 2024 captured 473 travel executives across Australia, China, Hong Kong, Israel, Singapore, the UK and the US. All participants confirmed decisions and choices are made about payment processes when booking trips for clients.
Cross-border payments occur when the payer and payee are in different countries, which creates a significant amount of revenue for Australia. However, outdated payment methods are having the reverse effect.
Co-founder and CEO of Airwallex Jack Zhang said outdated payment methods are not reliable for the fast-paced cross-border transactions travel agents need to make.
“As global travel continues to boom, online travel agents increasingly must rely on quick and seamless cross-border payments to surpass customer expectations at every touchpoint,” he said.
Though revenue from cross-border payments makes up nearly 80 per cent of travel executives’ quarterly profits, they hinder the ability to expand supplier and vendor networks in other markets due to market payment needs, FX fees as well as supplier and vendor payments.
The Airwallex and Skift research highlighted that 82 per cent of Australian travel companies earn more than one-quarter of their revenue from cross-border payments, yet 95 per cent of companies make foreign payments to suppliers and vendors regularly.
It found the diversity in payment methods across different markets is becoming a difficulty for 79 per cent of travel companies in Australia.
“Our latest study shows that slow and outdated payment processes are increasing the cost of moving money internationally, which is eating into their profits, which are modest at the best of times,” Zhang said.
It was also discovered customers have changed their payment preference methods since COVID-19, which is challenging the travel industry.
When travelling, people are still commonly using credit cards and debit cards when paying. However, there has been an increase in travellers opting to pay using local payment methods or peer-to-peer payment apps.
Eighty-eight per cent of travel executives in Australia have stated they have noticed the payment preference change in clients. This is contributing to 91 per cent of executives aiming to upgrade their payment technology over the next year.
This move towards advanced technology payments comes after an 88 per cent majority of travel administrators use bank or wire transfers to pay vendors and suppliers, though 50 per cent agree there can be issues involved with processing times and varying exchange rates.
These difficulties will continue to be a challenge for travel companies unless an upgraded payment technology is established.
Across the participant group, close to two-thirds of Australian travel finance executives confirmed complicated payment systems negatively impact their business’ efficiency.
This was followed by a further 67 per cent who said outdated payment systems are making an impact on their profit margins, a quarter of them saying there has been a four per cent erosion.
To simplify payment processes and regain revenue in their profit margins, 77 per cent of travel administrators are interested in an all-in-one payment platform to upgrade their payment technology.
Zhang said having one system capable of providing the ability to make all payments will be significantly beneficial.
“Modernising their financial operations with a unified and scalable payment solution will be critical to reduce the cost and friction associated with cross-border transactions. For smaller players especially, this can be what levels the playing field, enabling them to compete with their larger, more established counterparts,” he said.