Transforming travel: a look at the future of industry financial technology

New technology promises to transform payments in the travel industry

Having been battered and bruised during the COVID-19 pandemic, the travel industry is ready to face a world redefined by those long months spent in lockdown. Passenger numbers are rebounding, but what does the future have in store for the travel industry?

New modes of technology will have a huge role to play. As firms pivoted to new solutions to stay afloat during the pandemic, travel and tourism experienced something of a financial technology (or fintech) arms race. Industry stalwarts shifted away from old methods and embraced innovation, necessitating a nimble reaction from competitors. For companies exposed to currency fluctuations across different regions, fintech promises a better way of doing business: more agility, more foresight, with better insulation from the mood swings of day-to-day trading.

This article looks at how fintech is set to transform the travel industry in the coming years. We’ll chart the changing nature of cross-border payments, and showcase the trends, innovations and solutions that will come to define travel.

Out with the old

In the past, travel firms have found themselves exposed by gaps in existing technology. Clunky, outdated technology has come up against the fast-paced fluctuations of markets, creating risk for companies exposed to foreign currencies. Previous methods often led to increased costs – both in financial terms and in manpower – while the risk of human error threw another spanner in the works.

In today’s multi-polar world, there is an emphasis on connectivity but also accuracy. Competitors no longer lurk just down the round, but in many cases are located in different continents and armed with the latest technological improvements. Running defunct technology not only risks margins and cashflow – it also risks losing ground to the competition.

Previous technology required manual management of reconciliations for most firms in the travel industry. That meant spending hours ploughing through a wall of payments, diverting time and attention away from critical areas of focus for businesses. Nowadays, that has thankfully changed. New breakthroughs in technology allow businesses to receive daily reconciliation reports electronically, which can then be cross-checked against internal systems. Fintech therefore doesn’t only simplify once menial tasks, it creates verified computations that eliminate the risk of human error and streamline formerly archaic processes.

Fintech presents an opportunity for businesses looking to modernise their currency transactions. New technology streamlines old methods and helps manage risk in a more proactive way. For businesses in the travel sector, fintech is the latest frontier in the constant quest to improve and simplify payments.

New solutions

Fintech may feel like an unwieldy, complex topic, but its origin lies at the same source as any good business idea: problem solving. So, as markets have become more interconnected, and as travel firms (and their exposures) have spread across the globe, fintech has looked to bridge the gap.

One of the biggest developments has been in up-to-the-minute exchange rates, which provides companies with clarity in the often-murky currency markets. Complex algorithms and sophisticated AI help mitigate the risk of sudden fluctuations and helps ensure that businesses pay the optimal rate when making transactions in foreign currencies.

More significant still is the ability to forecast future rates. While nothing is certain in currency markets, being able to price in risk is crucial for travel firms looking to shore up their finances. Fintech allows companies to visualise their currency exposures in different scenarios, protecting budgets against “black swan” events and ensuring bottom lines are insulated from the multitude of events that impact exchange rates.

Then there’s the emergence of mass payment solutions, allowing businesses to eliminate the burden off loading multiple contracts across different currencies. Now, with one click of a button, international transactions can be made.

These are just a handful of the ways that fintech is pulling the travel industry into the modern age. Experts predict that the coming years will see a further sea-change, which means that the time is now for the travel industry to adapt. Fintech offers more efficient products better suited to counteract the inherent risk in financial markets. There is little indication that this innovation will stop, but plenty of signs that the businesses which adopt it will pull away from the competition.

Down the line

If we broaden our scope to several years down the road, it becomes easier to perceive just how large the effect of new technology will be. Fintech promises to transform the very way markets function. As part of a broader trend in banking and personal finance, peer-to-peer (P2P) platforms connect users connect buyers and sellers of individual currencies. By eliminating intermediaries, P2P platforms often produce more competitive rates and more transparency.

Blockchain – a distant cousin of existing fintech – offers a reliable and secure way to make international payments. By using a decentralised ledger, blockchain technology ensures transactions are secure by eliminating the need for intermediaries. This results in faster, safer, and more cost-effective currency payments, providing CFOs with more control over their transactions and reducing the risk of fraud.

Summary

Momentum is building in the travel sector’s adoption of fintech. As the modern world presents new challenges, so companies have pivoted to new technology that better reflects the challenges they face. The travel industry has quickly cottoned on to the need to adapt, particularly with gaps in old technology being rapidly exposed to innovative fintech.

The need for a better set of a tools has never been more apparent. Thankfully, travel firms exposed to currency payments are quickly adopting the next generation of solutions. Whether its advanced AI solutions, mass payment mechanisms or looking ahead to the next generation of technology, the travel sector is expecting the winds of change to blow through soon.

Fintech promises to increase efficiencies within cross-border payments and the businesses who make them. The new technology is set to replace tasks, not workers, meaning more time is available to spend on accelerating growth and improving workflows. The future of the travel industry remains uncertain, but its path to embracing fintech seems to be a certainty.