Payments complexity behind travel bookings
Andy Wiggan, CPO, Mangopay
When a traveller makes what looks like one simple booking, what is actually happening to that money behind the scenes?
For the traveller, a booking can look like one transaction. Behind the scenes, however, that payment may need to be allocated across several different parts of the booking. The platform might take a commission, the accommodation provider will be due its share, while other charges such as taxes or service fees may need to be accounted for separately.
Those funds do not necessarily need to move at the same time. The platform may take its commission according to one schedule, while the accommodation provider might not be paid until closer to or after the stay. If the booking changes or is cancelled, those allocations may need to change again.
When travel platforms expand across markets, add currencies and work with different types of suppliers, multi-pary money movement becomes more complex. Accepting a traveller’s payment is only the first step. The real challenge is managing what happens to those funds afterwards in a way that reflects the structure and lifecycle of the booking.
Why is a single travel booking creating more complex payment flows for travel platforms today?
Part of it comes down to how travel platforms themselves are evolving. Many are operating across more markets, working with a broader mix of suppliers and bringing more services into the booking experience.
. The operational challenge grows quickly from there. Once you are collecting money from travellers in one market and paying multiple partners across different countries and currencies, payments stop being a simple or straightforward transaction. Platforms have to think about how funds are collected, converted, allocated and ultimately paid out across that wider ecosystem.
The challenge is making sure that their financial infrastructure can keep pace as the platform grows, making payment operations more complex.
Why is simply splitting a payment between different parties no longer enough, and what do platforms need instead?
Splitting a payment answers the question of who gets what, but for many travel businesses there is another question: when should they get it?
There can be weeks or months between somebody making a booking and actually travelling. During that period, the booking could change or be cancelled, so immediately moving every portion of the payment to its final destination isn’t always the most practical approach.
To manage the different payment timings involved in a booking, platforms can use programmable wallets. These wallets allow the pay-in from the traveller to be separated from the eventual payout to a supplier. Funds can be held within the payment infrastructure and allocated according to the booking, before being transferred or paid out at the appropriate point.
Travel platforms get much more flexibility to reflect what’s actually happening with the booking rather than treating every transaction as a straight-through payment.
How can automating the way funds are routed, held and paid out help travel platforms manage things like local taxes, cleaning fees, commissions and refunds?
The biggest opportunity is to remove some of the manual work that sits behind complex payment flows.
If a platform already knows that a certain proportion of a booking represents its commission, another amount needs to go to the accommodation provider and another charge needs to be accounted for separately, there’s little value in a finance team having to unpick that transaction afterwards.
Rather than working out how funds should be allocated after a transaction has taken place, platforms can automate this as part of the payment flow.
As travel platforms grow and become more complex, how will their payments infrastructure need to evolve?
I think flexibility will become even more important. Travel platforms are unlikely to operate with exactly the same suppliers, payment providers, currencies or business models five years from now as they do today.
Building payment flows around a rigid model where every part of the process is tied to one provider can limit the platform’s growth. Instead, we are likely to see platforms become more modular in how they manage payments, choosing different providers where they make sense while keeping the downstream money movement under one centralized infrastructure.
Ultimately, the infrastructure needs to accommodate how the travel business evolves,
rather than forcing the business to operate around the limitations of its setup.
