This report looks at the recent explosion of innovation in consumer-facing digital payments technology, to better understand consumer adoption and impact on travel brands. Here we focus on three main fault lines of disruption: Peer-to-Peer payments applications, digital wallets, and the rise of cryptocurrencies including Bitcoin but also blockchain, the underlying technology that powers Bitcoin.
Much of the recent innovation that has occurred within this space has exploded in line with the proliferation of mobile personal computing. Our handheld devices, including smartphones and tablets, have allowed transaction-enabled mobile applications to move from a digital world historically contained by the fixed physical nature of computing, to a more direct and interpersonal role as a powerful enabler of commerce between people and brands. Now, the entire value exchange process including final payment and settlement can be initiated and finalized at any time, from our portable personal devices.
For the travel industry, elements of this technology — namely digital wallets, peer-to-peer payment systems, cryptocurrencies such as Bitcoin, and the blockchain systems that power cryptocurrencies — present the potential for more expansive and less expensive approaches to longstanding transaction models. Some of these digital value transfer (DVT) technologies aim to improve efficiency and convenience for the user. Others hold potential to disrupt traditional transaction models. Their users are ultimately travel brand audiences; all of these technologies are now siphoning attention away from traditional payment platforms including credit and debit cards.
While proliferation has moved quickly, these are still early stages and consumer adoption has yet to reach scale. At this stage, travel leaders should focus their attention on DVT as it applies to marketing and customer relations, loyalty, service, and the avenues that these applications can further satisfy consumers through streamlined processes. Digital wallets, for example, are powerful tools, especially when made available to consumers within the apps that travelers use. The digital wallet can create what one expert in this report refers to as “wonderful payment moments” — complementing established channels of payment with user experiences that are super convenient, information- and option-rich, and capped with instantaneous conversion when the consumer is ready to book.
Recent statistics suggest that peer-to-peer payments are catching on; the major platforms including Venmo are looking to move beyond peer-to-peer to facilitate business-to-consumer transactions. For travel, these apps allow for in-the-moment experiences that can significantly augment a journey. For example, one insurance company is using peer-to-peer technology to swiftly transfer baggage-replacement funds to passengers who’ve lost their luggage. Also, within these platforms, there is the potential for travelers to broadcast their purchases to other in-app and in-platform consumers — a valuable social-media marketing moment for brands.
Wireless payment solutions including Apple Pay and Samsung Pay are also catching on with consumers and vendors. This has implications for travel brands looking to engage with travelers once in-funnel but also in-destination and ancillary sales of services and products. Coincidentally, it could signal yet another step for Apple within the travel intermediary space.
PayPal is also making headway in digital payments on the front-end but perhaps more significantly, on the back-end with Braintree, a technology company the group acquired in 2013. Braintree is making it easier and much cheaper for companies of all sizes to integrate digital payments. Mid-to-long term, travel suppliers of all sizes will likely accept Bitcoin, Apple Pay, Google Pay, or whatever comes next.
Meanwhile, the volume of transactions processed with Bitcoin is growing. Decentralized currencies like Bitcoin remain controversial, but have become trendy with consumers and consumer brands that are looking to stand out. It’s a branding play and lifestyle choice, as much as it is an efficiency play. Travelers are opting for these alternative currencies to create new travel payments and experiences for themselves — escaping fees, charges, and virtually ensuring their currency is available wherever.
Decentralized currencies are also impacting markets by empowering historically marginalized groups in developing markets to gain access to vital banking services. Bitcoin is also gaining ground with the mainstream consumer in markets with volatile national currencies – in Argentina for instance.
Perhaps the biggest disruptive force coming out of Bitcoin is the blockchain, the underlying technology that allows Bitcoin to function without centralized oversight. Blockchain tech has caught the imagination of just about every industry as a cure-all promising to solve efficiency, security and transparency challenges. Some of it is hype, some of it is real. Within travel – and payments specifically – distributed ledger technology has shown promise within the loyalty space.
Certain blockchain powered startups are working to reinvent loyalty programs by making them cheaper, better, faster, inter-operable, and easier to manage from a liability perspective. The Universal loyalty platform is a buzz concept that could catch fire within the travel space – i.e. loyalty programs that can create wider-ranging rewards options across brands, attracting and retaining more consumers, and reinvigorating what can be an otherwise restrictive and cost-intensive exercise.
Going forward, travel brands should closely track consumer adoption of DVT applications. The pace of innovation in the space warrants close vigil and proactive strategy to capture opportunities and mitigate risks.