We’ve come a long way in the world of travel. Previously it was something few could afford, between expensive flights or train rides that brought us to places that most only dreamt of. Fast forward to today, travel has become an achievable reality for many people, fuelled by emerging affluence and armed with growing disposable incomes.
Despite the reduction in prices and affordability travel is and continues to be somewhat of a luxury. Because of the costs involved travellers scrutinise each and every payment they have to make, and the experiences that lead them to the actual act of payment. Their expectations have also increased as their options and interactions increased exponentially – from finding inspiration for the next holiday destination to booking, checking in, making in-flight purchases and ordering a taxi upon arrival. They want to negotiate these experiences in a seamless way and look for simple and pleasant shopping experiences, and that includes payment. But have payments evolved fast enough to meet the needs of these savvy travellers?
Digital payments – the new norm
While cash will likely always be king, digital forms of payments are fast becoming the main option travellers tap into today. From credit cards, bank transfers to smartphone payments and frequent flyer miles, travellers today are surrounded by an ever-expanding choice of their payment modes.
In fact, e-payments have emerged as the leading payment method in the Asia Pacific region when it comes to e-commerce transactions according to GlobalData. This is largely driven by the Asian countries and governments moving towards becoming cashless economies as they implement new initiatives to drive their respective Smart Nation agendas. In China, WeChat and Alipay are increasingly adopted by time-pressed consumers for convenience and for their hassle-free benefits.
E-payments popular in the Asia Pacific region (Image credit: ipopba/iStock-Getty Images)
Closer to home, Singaporeans are increasingly favouring e-payments with close to nine in 10 Singaporean consumers preferring to utilise e-payments. In addition, 48% said they now have more payment cards in their wallets compared to five years ago.
The explosion of payment options has concurrently led to increased challenges for the travel industry. Not only must businesses contend with intense competition from new players, they have to consider the increased passenger demands and expectations to offer integrated and seamless purchase experiences. The message is clear for travel businesses that want to emerge as leaders and survive in the new digital economy – integrate new payment options and explore innovation as part of the travel purchase journey or risk dying.
Why cash is still a preferred payment option even among the more digitally inclined
It is clear that travel is a hugely popular activity among Singaporeans. A recent study shows Singaporeans took approximately seven international trips in the last two years, and spent 20% of their total expenses on cross-border purchases.
Despite Singaporeans being extremely familiar and savvy with digital payments they still prefer to use cash during their overseas travel, with 95% still visiting a money changer to exchange foreign currency before travel.
This is because they want to avoid paying higher fees incurred by currency conversions, as well as processing and administrative charges. The result? Most end up having to deal with large amounts of unused foreign currencies, which they are likely to spend on things they do not need.
Across the globe there are local differences in payment type preferences. For example, in Germany direct debit remains popular while in Asia Alipay and WeChat Pay are popular. Travellers are faced with an increasingly fragmented payments landscape where some cards are more widely accepted around the world than others.
Credit card fraud is another primary concern for travellers and credit card companies. A Phocuswright study found that the classic credit card is, by far, the most widespread payment method as it is accepted by 99 % of airlines for direct bookings, but the risk of fraud is seen as above average at 27%.
As payments evolve, companies need to ensure that they provide a balanced variety of cost-efficient payment options for their customers while protecting themselves against fraud and non-payment at the same time.
Cash is still popular among Singaporeans on their overseas travel. (Image credit: dragana99iStock-Getty Images)
Towards better cross-border payments
The good news is that payment innovation has evolved to meet the challenges faced by consumers and companies in the travel industry. Businesses are exploring options that help to ease some of the challenges mentioned earlier, specifically to help travellers who want a more convenient and cost-effective way of getting foreign currency. For example, RHB Bank Singapore has launched a digital multi-currency card that enables customers to make purchases in local currency when overseas. The RHB TravelFX strives to revolutionise the way people travel and exchange for foreign currencies, by providing competitive rates and convenience.
Multi-currency cards are a safe and smart way to carry travel money, as travellers can have access to different currencies via the app, and enjoy travelling without physical cash or having to deal with leftover currencies. The added layer of security, which allows customers to lock the card when not in use or if they lose the card, also solves one of the customers’ pain points, delivering an enhanced and secure traveling experience.
Recently, WeChat Pay HK and China UnionPay also teamed up to provide mobile payment convenience to HK-China cross border commuters. With this partnership WeChat Pay HK and its range of WeChat app vendors can provide Hong Kong users with a range of services when they visit mainland China. Vendors, including Didi and Meituan.com, will join WeChat Pay HK on the platform. WeChat Pay will also provide Hong Kong users with exchange rate quotes and automatic exchange services, streamlining the payments experience for travellers.
It is still early days but we’re starting to see more and more innovations in the area of travel and cross-border payments, and has been highly encouraging so far. While many businesses have awakened to realise they need to be part of the ecosystem and the accelerating digital payments, there is still much more that has not been explored. Ultimately, this requires a concerted effort among key players in the payments ecosystem to help drive areas such as automation and security so we can make travel a much easier and enjoyable experience for all.
About the author
Ng Fook Sun is the executive vice president, sales, financial institutions of Wirecard Global, an internet technology and financial services provider that is listed on the German stock exchange and headquartered in Aschheim, Munich.
• Featured image credit: Wirecard
