Connect with us

Business

THE TRAVEL INDUSTRY HAS A PAYMENTS PROBLEM. IT’S TIME TO FIX IT.

Published

on

Paulette Rowe,CEO, Integrated & Ecommerce Solutions

 

The financial impact of the COVID-19 pandemic has been huge for the travel industry. Finding a new way to work with their acquirers is going to be critical as we look to recovery.

 

The travel sector and the payments industry have never had a simple working relationship. There are several examples of travel industry failures, such as the collapse of Thomas Cook and Monarch Airlines, that have concluded with the travel operator and their payments partner accusing the other of being the source of the failure. This happens when the acquirer withholds funds to cover the cost of the chargebacks it will be liable to repay customers if the operator goes out of business. Taking this precaution is of course understandable, but it is the view of the travel business that this withholding of cashflow at a critical time creates enormous pressure for them and in fact is final straw that triggers the very collapse that the acquirer is seeking to protect itself against.

Paulette Rowe

And of course, the pandemic has brought that strain in the relationship into even sharper focus. Global travel and tourism lost almost $4.5 trillion in 2020. For context, while worldwide gross domestic product contracted 3.7 percent, travel’s contribution to the global economy reduced by 49.1 percent.

And it hasn’t only been only financial challenges that the travel sector has suffered since the outbreak of COVID-19; there have been operational issues to face as well, as they were forced to process many millions of reservation cancellations. To make matters worse, some acquirers reacted to the adverse market conditions by either exiting the sector altogether, or resetting the terms of business with their travel clients. This has put even more pressure on the relationship between the two parties in a situation where the travel business has options because fewer payments partners that will work with them.

 

The heart of the issue: future delivery payments are high risk

Much of the friction that can occur between the travel sector and acquirers stems from the fact that travel is considered a high risk vertical by the payments industry, and this was true well before the pandemic. This is true of all sectors where long periods of time occur between the consumer’s payment and the date that they receive the goods or services. In the travel industry this period is typically 60-90 days.

If the goods or services are not delivered for any reason, be it cancellation, unforeseen circumstances such as COVID-19, or the business ceasing to trade, it is the acquirer who is liable for repaying the customer. When the high transaction values typically seen in travel are factored into the equation, acquirers can find themselves exposed to tens of millions of pounds worth of risk for a single travel business. Many simply do not have the appetite for that level of risk.

 

A new solution: safeguarding addresses the issues created by holdbacks

As we have already discussed, risk is usually managed by the acquirer through withholding cash as collateral. But there are several drawbacks that makes this a sub-optimal solution for the travel sector. The drain on liquidity is an obvious one, but in addition it is often unpredictable how much acquirers will withhold to offset the fluctuating risk, and that makes decision-making and forecasting extremely difficult. Withheld funds also cannot be shown on a company’s balance sheet.

So it will come as no surprise that travel sector is trying to find a new way of working with acquirers as they strategize recovery and growth beyond the pandemic. And progressive payments companies including Paysafe are also looking for new solutions to work more harmoniously with the sector, specifically replacing cash collateral with a trust-based mechanism called safeguarding.

With safeguarding, the travel business still lodges a cash reserve with a third party. But instead of being repaid in large sums often at the acquirer’s discretion, the funds are released steadily on a planned basis either when or shortly before travel takes place.

This new way of working addresses both the liquidity and transparency issues the travel industry has consistently voiced its concerns about. Funds held in trust can also remain on the company’s balance sheet.

 

Working towards a better future

Cash collateral was the go-to solution for managing acquirers’ risk exposure in the travel sector for years. But this system is no longer fit for purpose. Safeguarding will soon become the most common mitigation process for travel merchants and acquirers. It will enable airlines and the rest of the travel industry to avoid tying up critical funds that would be better spent on running and expanding great businesses, as well as attracting investment through making balance sheets healthier.

 

Business

How app usage can help brands increase their online revenues and customer retention

Published

on

Arunabh Madhur, Regional VP & Head Business EMEA at SHAREit Group

 

Brands are continuing to invest heavily in the e-commerce market despite current market and economic challenges – and they need to. Indeed, the current global e-commerce market is valued at around $5.5 trillion. Further to that, estimates show that online retail sales will reach $6.7 trillion by the end of 2023 – and e-commerce making up 22.3% of those sales.

So despite the economic and market climate, businesses must still plan for success and cater to customer demands to make the most of the global e-commerce opportunity.

 

Mobile apps are key

Mobile apps are now a fundamental component of retail, as they provide customers with a convenient and engaging way to shop from their phones. The past couple of years has been rocket fuel for digital transformation, providing an opportunity for the retail industry to innovate. Whilst global trends continue to point to the user growth of Facebook, TikTok and Instagram, the trends underneath the headlines highlight significant opportunities to drive new customer acquisition, which in turn demands a targeted customer retention strategy from companies.

According to research from Baymard Institute, 69.82% of online shopping carts are abandoned and with demand expected to continue, pressure is growing on retailers to expand current offerings and create personalised experiences to tackle this. One of the big challenges e-commerce companies face, though, is analysing and maximising the behaviour of users, and bringing down the cost of their marketing and engagement against how much is earned through a customer making a purchase.

To meet customer demand, mobile apps offer a variety of features such as push notifications, product recommendations, exclusive discounts and offers, and easy checkout processes, to make the shopping experience easier for customers. By leveraging the power of mobile technology, brands can create an immersive shopping experience tailored specifically to their customer’s needs, and this in turn helps increase customer loyalty, customer return rates, and maximise online revenue.

 

Re-targeting and re-engaging customers

Brands should focus on re-engaging with returning consumers through a personalised strategy as this can help increase the lifetime value of users, which in turn helps brands bring the cost of their marketing down knowing that brand loyalty has been achieved. According to research from Google and Storyline Strategies study, 72% of consumers are more likely to be loyal to a brand if they offer a personalised experience.

Optimising the online shopping experience is crucial in retaining customers. Today, consumers need a more ‘human’ touch, i.e., smart product suggestions based on buying history & behaviour that helps build a one-to-one relationship between brand and buyer. In particular, push notifications haven’t just enhanced personalisation but also increased app engagement by up to 88%. Push notifications have also proven to get disengaged users back, too, with 65% returning to an app within 30 days of the push notification.

Another strategy to consider is the option of adding buy now pay later (BNPL) options at checkouts for customers. Brands that add the option of financing at the checkout allow customers to spread the cost over time, which according to Klarna has resulted in a 30% increase in checkout conversation rates.

Publisher platforms allow brands to leverage their reach and sticky user base. Especially with open platforms such as SHAREit, which can help e-commerce brands create a strong revenue conversion with higher average order value with unique retargeting and user acquisition solutions. Because users are not just sharing product links, but also sharing e-commerce apps and deals among their community. Users of these publisher platforms are also encouraged to share products and apps through platform activities.

 

What the future of e-commerce holds for brands

E-commerce is positioning itself as a key facet in retail, and its future. With Advancements in technology, customers can access various products and services worldwide through their smartphones – making shopping more accessible than ever. Brands must put consumers at the heart of everything they do, like never before. Offering incentives and payment options, personalising customers’ experiences and re-engaging them, as well as targeting new customers, in an effective and un-intrusive way, are all ways in which they can influence purchasing decisions and improve retention figures.

 

Continue Reading

Business

Does the middle market have a financial edge?  

Published

on

Ilija Ugrinic, Commercial Solutions Director at Proactis

 

Companies tend to look up the ladder when searching for ways to improve efficiency and business performance. What are larger competitors, or others outside their industry, doing right that they can learn from and implement?

What smart technologies or bright ideas do they have that could create efficiencies for them, too?  

As we enter yet another likely volatile year for business, punctuated by recession, should businesses continue to only look up? And could the approach of a slightly smaller business offer more of a competitive edge? 

Large corporates tend to pioneer innovation in automation by simple virtue of the resources they have. Home to transformation directors and departments, with the ability to implement large overarching software systems, they pave the way for others and are often the first to digitise their source-to-pay cycle at pace. 

Ilija Ugrinic, Commercial Solutions Director at Proactis

While growing businesses understand the merits of full automation, implementing it is often too expensive and it doesn’t bring the rapid realisation of benefits that they need. They need to consider what will bring them the biggest return on investment – and the reality is that those in the middle market don’t necessarily need all the elements of an ‘all-doing’ piece of software. What’s more, without dedicated personnel to project manage a transition, they frequently lack the currency of time to be able to comfortably transform working practices, and take staff with them on the journey, without taking resource from other areas of the business.  

For SMEs, digital transformation has never been quite as seismic a shift. Instead, they tend to take a modular approach, employing digital solutions only for particular areas of their finance department, where they need them. This has never been a particularly strategic move. Rather, for a growing business that values quick results and watches their outgoings with greater scrutiny than their larger counterparts, it’s something that suits them better. A modular approach also comes with very little disruption and can be implemented relatively seamlessly into their existing organisational setups. 

But while growing businesses are opting for a modular approach because it’s the most cost and time effective option for them, the benefits go far beyond that. The beauty of a modular approach is that it is agile. The last three years – with pandemics, an increasingly challenging climate and shifting geopolitical tensions impacting our global economy – have only served to remind us of how suddenly, and drastically, a business landscape can change. The companies that have weathered the storm are those that have reacted and adapted quickly – those that have been capable of changing the way they do things with little impact on day-to-day operations. A modular approach can offer just that.  

Businesses using modular finance technology can integrate small solutions that sync up with the rest of their processes, quickly and seamlessly – and these systems can be integrated into their existing Enterprise Resource Planning (ERP), too. There’s no restriction of a monolithic or aging piece of software either – finance teams can add and update small solutions to their daily operations without the upheaval of having to replace or update large IT infrastructures or wider working practices within the business to accommodate the new software.

Unrestricted by entrenched and hard-to-change systems, the speed with which SMEs are able to react to market changes is miles ahead. A prompt software add-on to manage risk, or create a quick fix in response to a market shift, can be virtually a knee-jerk reaction. SME’s abilities to bend and flex to today’s world efficiently is seeing them reap the benefits of a modular approach. It’s lean, it’s fast and it’s facilitating their growth with a strong competitive edge. And as some of these companies’ growth propels them into the large corporate sphere, they’re choosing to keep a modular approach to finance.  It will certainly be interesting to watch those middle-sized companies which grow to the extent that they find themselves competing in the same space. With no financial remodelling to assume a large ‘all-doing’ piece of software, they’ll be competing against their counterparts with completely different tools in their arsenal.  

With technology, working life and business needs continuing to change day to day, we have another year ahead of us that will see companies running to keep pace with each other – and fast-growing companies’ approach to finance could be the silver bullet that enables them to catch up with, and even take on, big enterprises. It might just give them a competitive edge against large corporates in these turbulent times.

Continue Reading

Magazine

Trending

Business1 day ago

How app usage can help brands increase their online revenues and customer retention

Arunabh Madhur, Regional VP & Head Business EMEA at SHAREit Group   Brands are continuing to invest heavily in the...

Banking1 day ago

Will ‘Britcoin’ change the way we bank?

The Treasury and Bank of England recently announced a state-backed digital pound is likely to be launched in the UK...

Finance1 day ago

In-Store, Online & In-App – Unifying Payment Authentication

Michel Roig, President of Payment and Access, Fingerprints   Often, new technologies are lauded as the death of existing ones....

Banking1 day ago

Why the future is phygital

By Eric Megret-Dorne, Head of Card Issuance Services and Service Operations at Giesecke + Devrient   Digital banking has become...

Finance1 day ago

Why Keeping Track of Cash Is Key to Economic Survival

By Joshua May, Consulting Manager EMEA, BlackLine   Finance and Accounting (F&A) has always had a reputation for its calm...

Business2 days ago

Does the middle market have a financial edge?  

Ilija Ugrinic, Commercial Solutions Director at Proactis   Companies tend to look up the ladder when searching for ways to...

Business3 days ago

Hybrid Intelligence – The only way to face the problems of the future

Author: Prof. Dr. Iris Lorscheid, Vice-Rector Research and Professor of Digital Business and Data Science Computer Science at the University...

Business4 days ago

Consumer demand driving sustainable payments

Jenn Markey, VP Payments & Identity, Entrust   Sustainability is a buzzword that seems to be at the forefront of...

News4 days ago

Adyen drives conversion uplift with advanced authentication solution

The company’s expanded authentication offering optimizes authorization, security, and end revenue   Adyen (AMS: ADYEN), the global financial technology platform...

Finance4 days ago

It’s time for financial institutions to take personalization seriously

Maria to David Hetling, Global Marketing Director, Financial Services, RWS   Financial institutions will always play a critical role in society, offering...

Banking6 days ago

The Future of Capital Markets: Democratisation of Retail Investing

Nicky Maan, CEO of Spectrum Markets   Over the past decades, global capital markets have undergone tremendous changes. There have...

Top 101 week ago

5 Often-Overlooked Investment Options To Consider Exploring In 2023

When choosing what to invest in, many people will initially focus on the stock market which is considered a more...

News1 week ago

New Open Banking platform Archie waves a timely hello to Britain’s beleaguered businesses

Archie is a game-changing payments and data platform that’s inherently human in its approach; a refreshing proposition in the jargon-heavy...

Finance1 week ago

Innovating inclusivity: How invoice financing is diversifying access to financial streams

“Entrepreneurs, particularly those in the supply chain in Europe, the United Kingdom, and indeed the rest of the world, frustrated...

Business1 week ago

The data behind AI’s success in the financial sector

Or Lenchner, CEO at Bright Data   AI (Artificial Intelligence) has taken the world by storm. The OECD estimates that...

Business1 week ago

The Risks Of Company Mergers And How To Avoid Them

There are a lot of benefits to agreeing on a company merger with another business, and this includes, but is...

Finance1 week ago

How diversity is evolving in the fintech industry

by Elena Dimova, VP HR Bulgaria and Operations & Technology at Paysafe.   With both finance and technology being traditionally male-dominated...

Finance1 week ago

How the Isle of Man is encouraging a new generation of FinTech innovators

FinTech’s potential to transform how finance and business operates has gained attention around the world in recent years. In 2022,...

Business1 week ago

Protecting Customer Data in Online Business

With the increasing number of online businesses, protecting customer data has become more important than ever. Cybersecurity breaches can cause...

Business2 weeks ago

END OF AN ERA OF CHEAP MONEY

Professor Milos Petkovic, PhD Lecturer at Berlin School of Business & Innovation   Prior to 2022, the global financial market...

Trending