Optimizing the way Online Travel Agencies pay travel suppliers in Latin America
One-click payments, alternative payment methods, installments, single transactions, and mass payouts. See how they are critical to your OTA business performance in LatAm.
João Paulo NotiniFebruary 13, 2023
The online travel agency (OTA) market in Latin America (LatAm) has never been so burgeoning. Expected to grow by 30% annually through 2025, according to GlobalData, the region, along with other developing economies, is an excellent alternative to saturated markets, such as Europe and North America. Yet, payments are still one of the main challenges for global OTAs improving their business performance LatAm. Why?
Since an OTA is a web-based marketplace that sells travel-related services, it must deliver a frictionless payment experience to customers and travel suppliers. Due to local specificities in LatAm, enabling a seamless end-to-end process can be difficult, but we will show you how to overcome these challenges.
Fasten your seatbelt. It is going to be a fantastic journey!
Discovering payment needs
If OTAs are all about the convenience of accessing travel services, why not enable the same experience regarding payments? They must manage a complex payment distribution process while balancing the thin margins and commissions endemic in the travel industry. So, how do you do that efficiently? First, we must look at the payment needs of the critical entities within this process: customers, travel suppliers, and the OTA itself.
Customer payment needs
- Fewer payment costs: More than half of travellers would give up a booking if they needed to pay a surcharge to use their preferred payment method. The lower purchase power for Latin Americans than Europeans and North Americans makes the cost even more crucial in the purchase decision process.
- Faster payments: 59% of travellers are willing to pay through one-click payments. Besides allowing them to complete purchases faster, depending on the payment solution, it safeguards personal data better. This is especially important for customers in Latin American countries due to the increased fraud risk.
- Alternative payment methods (APMs) and Installments: According to the World Bank, 72% of the adult population in LatAm doesn’t have a credit card, making APMs crucial for OTAs in the region. For this reason, more than half of Latin Americans look for instalments when making a reservation, while 45.4% of travellers would like an easier checkout through digital wallets.
- A seamless checkout process: Declined payments, with a user having to re-enter information to complete the checkout, and redirections during the process to complete the payment were among the top five reasons travellers would give up a booking.
Source: Power your payments, 2022
Supplier payment needs
- Faster commission processing: The average time for commission payment processing is usually within 30 to 45 days of a booking, which can be too long for some suppliers.
- Direct deposit option: According to a survey by Phocuswright, the preferred payment method among travel suppliers is direct deposit.
- More transparency: Providing detailed financial reports, including the breakdown of sales, fees, and charges, is becoming increasingly crucial for travel suppliers as it gives them a better understanding of their earnings and commission payments.
- Accurate reconciliation: Accurate and efficient reconciliation processes are crucial for maintaining trust between OTAs and travel suppliers.
OTA payment needs
- Faster payments received: The faster an OTA receives compensation, the easier it is to manage cash flow and have more predictable budgeting. Also, OTAs want to offer faster checkouts so they don’t lose sales to direct bookings on travel suppliers.
- Optimized payouts: OTAs need to reduce manual work when dealing with many suppliers in different locations and currencies, managing amounts for payouts from micro to mega payments, and having an overview of all transactions.
- Lower fraud risks: According to IBM, travel and transportation is the second most targeted industry for cyber fraud, whether receiving or making payments. Thus, considering LatAm’s increased fraud risk scenario, OTAs must be even more vigilant.
- Better price and exchange fluctuation management: Since OTAs operate in multiple countries, receive payments in different currencies, and deal with bank currency conversion charges, managing this process can be challenging.
- A reliable local payments partner in LatAm: OTAs must have a well-experienced payments provider for the LatAm market that is PCI certified and a partner of a reliable GDS / NDC system to operate within the travel industry.
Solving the challenges
LatAm’s financial scenario is unique, and each market differs within the region. Despite the higher risk of fraud, there’s still a large unbanked population. People have a shallow credit card spending limit, so they rely on APMs that they are familiar with. Consequently, as we have seen previously, OTAs need a holistic approach to create an efficient travel ecosystem by fulfilling their businesses and their supplier’s and customers’ needs. How can they do that?
Here are five main initiatives towards payments that OTAs can take:
1) Implementing one-click payments
One-click payment allows returning customers to pay in a single tap without having to provide their payment information again. They can be used for credit cards, debit cards, and even digital wallet payments. As stated previously, more than half of travellers look for this feature, and depending on the solution, they are less susceptible to fraud than traditional methods.
2) Paying and getting paid through alternative payment methods
Alternative payment methods (APMs) are necessary, especially in Latin America, where seven out of 10 people lack credit cards. Thus, paying and getting paid in APMs, such as instant payments and digital wallets, increases online travel sales and allows a faster and more streamlined transaction, which leverages both the customer’s and supplier’s satisfaction.
3) Offering instalments and handling high tickets
Since many online agencies depend on high ticket sales, they need a payment solution to process high values and avoid the overhead of manually invoicing clients. Additionally, as shown previously, more than half of travellers look for instalments when making a reservation. This method allows customers to split payments in monthly parcels, and it is an intelligent move for OTAs due to its win-win potential. From the customers’ side, separating the income makes travel more accessible, especially when they make high-value purchases. For the agency itself, offering instalments leverages sales and customer loyalty and, according to EBANX data from travel companies, increases the average ticket value by up to 6x.
4) Adopting mass payouts with split payments and local currency
The best way for OTAs to reduce operational overhead when dealing with their global payout process and pay their suppliers timely, accurately, and according to their local payment preferences is through an efficient payout process. To do so, they need a robust payment platform to handle mass payouts with different alternative payment methods and implement an automatic split payments feature, which means that the funds received from customers can be split between multiple suppliers instantly and automatically.
5) Enabling single-transactions
Travellers want a seamless checkout experience; here’s where the single-transaction process comes in. It allows purchases from different sellers and locations in the same checkout and lets customers pay the amount all at once in their local currency, no matter the number of sellers.
EBANX – The undisputable payments partner for OTAs in Latin America
You have seen the importance of having a well-experienced and reliable payment partner to succeed in the Latin American market and the travel industry. Thus, count on EBANX as the top-performing payment partner from pay-in to payout in 15 markets in Latin America.
By partnering with EBANX, you will get the following:
- An ally with +10 years of experience in LatAm, which is PCI certified, fully regulated in all markets where it operates, and a partner of UATP (a GDS system connected and compliant to the NDC system).
- Access to +100 payment methods to fulfil your customers’ and travel suppliers’ needs while increasing performance.
- An all-in-one platform that is robust enough to deal with different suppliers and double-loop payment processes.
- An efficient mass payout to pay your suppliers accurately, quickly, flexibly, and streamlined.
- Single transaction, one-click payment, account updater, comprehensive notification system to message customers when purchasing, and other features to increase your conversion rates.
- Currency hedging with fixed FX rates, real-time monitoring of all emitted payments, and a detailed reconciliation.
- An ally with +100 local partners and direct connections to acquirers to increase your approval rates.
- … and much more!
Are you ready to take off your online travel agency with EBANX?
> REQUEST CONTACT <