International travel, worldwide, has been on an upward trend for more than twenty years. And a recent report from Skift shows that even with a slight slowdown in growth, international travel is predicted to double in the next decade and will total over 100 million traveler departures by 2029.
For more see: 2018 Destination Trends: Robust Growth Continues Worldwide and Travel Trends For 2019.
Growth in international travel is good news for travel companies. However, international payments raise unique challenges that require a thoughtful strategy. Choosing the right payments partner is critical in addressing the key challenges inherent in paying suppliers around the world.
Key Challenges Of International Payments
Challenge 1: Security Concerns And Fraud Risk
Every company – large and small, domestic and international – is thinking about fraud risk, and payments are one of the most vulnerable points of entry. The travel industry is often particularly targeted due to the high value of payments made and short timeframes for booking (for more see: Travel Industry One Of Most Targeted For Fraud).
As travel companies meet the growing demand from travelers for more authentic experiences across the globe, the need to connect with hotels and other travel suppliers in exotic and remote areas increases. In these cases, the chances of data breaches or even rogue staff members can make the fraud risk even greater.
Choosing a payments partner that offers virtual payments can be an ideal solution for addressing security concerns. Virtual card numbers (VCNs) are designed for one-time use and controls can be employed to further limit usage – including how much can be charged, merchant restrictions, and start/end dates – so the risk of fraud is minimized. If a card number is stolen, it is effectively useless for future transactions once it has been used.
When using virtual payments to pay suppliers, travel companies also protect their customers. Payment from the traveler is collected separately, and VCNs are used to pay suppliers, which avoids sending on customer card details – protecting both the customer’s data and the travel company’s reputation.
Challenge 2: High Fees On International Payments
Making international payments can incur high and/or unexpected fees. Cross-border fees and foreign exchange rate markups can add up to three percent on each transaction. This may seem minimal, but if a company does extensive business with international suppliers, the cost incurred can add up to be significant.
Virtual payments allow travel companies to pay suppliers in over 150 currencies. The supplier is paid in their own local currency, which can also allow the travel company to negotiate improved rates. The company can then settle the payment with the payments provider in their own currency, avoiding unexpected or hidden exchange rate mark ups and cross-border fees.
Challenge 3: Risk From Currency Fluctuations
For companies making international payments, the additional risk of exchange rate fluctuations should be considered.
Currency exchange rates fluctuate constantly, often in unpredictable ways. This can either work to the advantage of travel companies, who can benefit from favorable exchange rates, but it can also pose risk. If a company pre-arranges a rate with a supplier in the local currency, once the payment is due, a change in the exchange rate can drastically change how much the company will ultimately pay.
VCNs can help protect against foreign exchange rate fluctuation risk. Travel companies can pay suppliers and then be billed by the payments provider in the same currency, avoiding exchange rate risk where possible. For example, WEX offers billing is available in up to 22 major currencies.
Challenge 4: Supplier Relationships And Acceptance Issues
Maintaining positive supplier relationships is critical for every travel company – ensuring payments are made on time and in a manner that suits the supplier can be key to strong relationships. This can be made even more challenging when paying international suppliers.
Finding a payments partner that offers a virtual payments solution with a wide variety of payment options will help travel companies pay suppliers across the globe with ease.
Accepted by suppliers through existing networks such as Mastercard, Visa and JCB, virtual payments with global, regional and local payment options will allow travel companies to tailor each payment made to suit the needs of an individual supplier – as well as the business needs – helping achieve global acceptance at maximum profitability.
It’s clear, the international travel market has huge potential in the next decade for travel companies who are equipped to navigate the challenges involved in making international payments. Choosing a payments partner with extensive expertise in making international payments is critical in helping companies optimize payment flows and costs and reduce exposure to fraud and risk.