Australian fintech can revolutionise travel industry payments
The word “travel” is synonymous with Australia and Australians. The so-called “lucky country” has long been a destination of choice for tourists the world over, and Australians rank ninth on the list of countries whose people travel the most frequently. But when Covid-19 forced the closure of international (and intrastate) borders, Australia’s travel industry crumbled.
Between March 2020 and March 2021, international visitor spending fell 94.9% on the previous year, contributing just $1.7bn to the local economy. Employment in the sector reduced by 20% and domestic travel spending dropped by $16.1bn.
Thankfully, there is light ahead for the travel industry, aided by another growing Australian export – fintech. In fact, thanks to innovations in automated payment workflows and APIs, there are plenty of reasons for tourism operators to be optimistic about the future of Australian travel.
The economic impact of Covid-19
The most significant change to Australia’s travel industry over the past two years has been the shift from a thriving international market to one reliant almost entirely on the domestic traveller.
According to Tourism Australia, the country welcomed 8.8 million international visitors in the year to March 2020, contributing $41.5bn to the local economy. In the following 12 months (to March 2021), there were just 66,000 international arrivals recorded.
Although Australia reopened its borders to international visitors in the first quarter of 2022, experts predict that continued uncertainty around global travel and the restrictions imposed by other countries on their citizens will dampen tourism numbers until at least 2024. (For example, China’s borders remain sealed in early 2022 - when most others were re-opening - due to the country’s “zero Covid” policy, effectively shutting out Australia’s biggest tourism market.)
In comparison, IBISWorld forecasts international travel by Australians to increase by 595.5% in 2021-22, driven predominantly by a desire to reconnect with overseas-based family and friends.
While the domestic tourism market began to bounce back when border controls were relaxed, data from the Australian Trade and Investment Commission showed a propensity among local tourists for shorter trips than prior to the Covid-19 outbreak. The average trip spend in the June 2020 quarter was just $385 per person, compared with $648 per person in June 2019.
Compounding the issue is a hospitality labour shortage brought about by the reduction in temporary visa holders and international students admitted to Australia, and the shift by local workers towards more secure employment sectors.
Emerging travel trends
As travel markets reopen through 2022 (notwithstanding any further pandemic Covid-19 setbacks), there are a number of emerging trends likely to impact the local industry.
First and foremost, people are more likely to travel within their own country, than to risk an overseas trip. A study by the University of Queensland found that just 51% of Aussies were keen to travel internationally in 2022. KPMG’s research predicts that local holidays will be shaped by a desire for Aussies to get to know their own backyard, combination trips that include both work and recreation, and the return of the family road-trip.
Unsurprisingly, two years of border closures and new virus variants have caused travellers to become more cautious. The value of comprehensive travel insurance has never been higher. People are also demanding flexibility from their travel providers, such as the ability to reschedule at a moment’s notice or reallocate travel credits towards alternative activities. Complex refund or cancellation processes will hamper businesses’ ability to compete against more flexible operators who can guarantee fast returns or easy credit transfers.
The increased cost of travel, due to a reduction in services and suppliers, combined with the added complexity of ever-changing entry rules (such as vaccine passports and testing requirements) are behind predictions that locals will be more inclined to book shorter, less complicated holidays, or to re-engage the services of travel agents.
Tourists will be attracted to good-value holidays, which promise high-quality service, ready-made activities and easy add-ons. Similarly, the uncertainty surrounding the cruising industry has driven the demand for all-inclusive stays onshore.
How Australian fintech can help the travel industry
The revival of the Australian travel industry will almost certainly rely on providers’ ability to do more with less. Hence, the opportunity for fintech to drive innovation in the travel sector has never been higher.
By partnering with Australian fintechs, travel operators will be able to transform into one-stop-travel-shops. For example, operators can leverage APIs to become a virtual concierge, facilitating business-to-business (B2B) payments accurately and on time, so the customer need only have one touch-point.
Through API integration, travel providers can also leverage embedded finance, issuing their own financial services products, such as insurance or credit. In turn, businesses will be rewarded with increased trust (important for acquiring first-time customers), and increased investment in add-ons or higher-quality offerings, as customers spread payments over multiple months.
Payments technology, in particular, will be crucial for streamlining complex transactions and workflows, enabling businesses to offer truly flexible booking services. Customers will increasingly expect to be able to pay for travel with the payment method of their choosing – travel credit, Buy Now Pay Later, loyalty points – and to change these arrangements quickly and easily. Businesses that rely on manual processing or outsourced financial services may find themselves left behind in this rush to genuine flexibility.
As international travellers return, paytech will help providers reduce the operational costs associated with different currency payments, while simultaneously providing a high-level of customer service. An automated payment workflow can also support businesses to scale up as demand increases, or respond to new opportunities and trends.
The Australian travel industry has suffered a significant hit to the bottom line and there is likely more pain to come, as the world deals with new challenges, unpredictable weather events and the continued risk from Covid-19. With the right fintech partner, tourism operators can position themselves to withstand such threats, take advantage of new opportunities and thrive amid the inevitable travel rebound.
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