Across multiple industries, consumers are increasingly driven to transact when their preferred payment method is available - and travel is now following suit. Here’s why offering a variety of local payment methods is one of the most effective ways to drive bookings, save your business money on each transaction, and improve client satisfaction.
While travel purchases are undoubtedly a bigger investment than most e-commerce transactions, the payment process - in the eyes of the purchaser - is ultimately no different. Consider the last time you made an online payment. If your preferred payment method wasn’t available, would you have gone ahead with the transaction?
The latest industry data shows that when it comes to travel, many travelers will not complete their booking if their preferred local payment method is unavailable. The key to solving this abandoned cart issue lies in local payment options.
What are local payment methods, and why do they matter?
Local payment methods refer to payment options that are specific to a particular country or region, reflecting the unique preferences and financial systems of each region or market. These methods are commonly used by the local population to make purchases and may include popular payment options like bank transfers, mobile wallets, and local credit or debit cards.
While it may seem insignificant to offer your travelers the flexibility to pay with their preferred local method, it's important to consider that travelers have grown to expect a certain level of flexibility and personalization across their entire trip - including during the booking and payment process. Customization and personalization were two of this year's strongest emerging trends, highlighted by WeTravel's 2023 Travel Trends Report which revealed data points such as that 80% of travelers were paying for tours with at least one, but most commonly four installment payments.
With travelers now regarding personalization as early as the booking and payment process as essential, it’s vital that businesses can align their offerings with this desire. Offering a variety of payment methods is one way that your business can ensure the ‘how’ of booking can be personalized.
Consider a case study: a traveler from Brazil, where the most commonly used local payment method is Pix, wants to book a trip to Europe. They find the trip they'd like to book, but see that it's priced in Euros. Suddenly, credit card or wire transfer fees, as well as foreign exchange fees, are looming on top of what the price of the trip is. Additionally, an unfamiliar payment portal may provoke hesitation and increase the chance of them abandoning their booking. Do they pay the charges through an unknown payment processor, or book with another company that allows them to pay with their local method?
On the other hand, if presented with the option to use Pix - their familiar and trusted payment method - the risk of cart abandonment is greatly reduced, which boosts your business’s bottom line.
Since travelers have become accustomed to paying using their preferred method for other online transactions, the potential to win or lose bookings due to the ability to book via local payment methods shouldn’t be underestimated.
What are the common local payment methods in different countries?
In the United States, common local payment methods include ACH and mobile payment apps like Apple Pay and Google Pay. These methods are widely accepted and convenient for both businesses and consumers. In China, on the other hand, mobile payment apps like Alipay and WeChat Pay dominate the market, with millions of users making transactions using their smartphones.
In Germany, Sofort is a widely used local payment method, while in the Netherlands, iDEAL is a commonly used local payment method, and in Brazil the most popular payment method is Pix. Each of these methods allows customers to make online payments directly from their bank accounts, providing a secure and familiar option. These examples highlight the importance of understanding and accepting local payment methods to cater to the preferences of customers in different countries.
What are the advantages of offering local payment methods?
For both the traveler and the trip organizer, the benefits are multi-fold.
- Boosting the Customer Experience: Integrating local payment methods considerably boosts the travel experience of your clients. It delivers a feel of comfort and ease as travelers pay using familiar methods. This reduces hurdles in the payment journey, facilitating a smoother process for customers booking group or prolonged trips.
- Increased Conversion Rates: When travelers encounter payment methods they trust and recognize, they are more likely to complete their bookings. Local payment methods are associated with a level of trust and security that can boost conversion rates. This means that travelers are less likely to abandon their bookings due to uncertainties about the payment process.
- Elimination of Foreign Exchange (FX) Fees: Traditionally, making international payments burdens travelers with excessive foreign transaction charges. By embracing local payment methods, business owners are in a prime position to help their travelers bypass these unnecessary expenses. This results in a more appealing and wallet-friendly package for customers.
- Adaptation to Local Regulations: By offering local payment methods, tour operator businesses can seamlessly adhere to the regulations and laws of each market they operate in. Not only does this ensure legal compliance, but it also mitigates the risk of encountering regulatory issues and possibly, hefty fines.
- Competitive Advantage: Offering local payment methods will help your business stand out from competitors who may not offer the same level of convenience and choice when it comes to payment options. This can lead to increased market share and customer loyalty.
- Reduced Risk of Fraud: Offering local payment methods can provide enhanced security safeguards aimed at preventing fraudulent activities. By implementing these options, your tour operator business can significantly reduce the risk of fraudulent transactions, thereby retaining your customers' trust.
How can businesses successfully integrate local payment methods into their operations?
Before integrating local payment methods, it is crucial to understand the payment preferences of your target market. Conduct market research - including analyzing web traffic - to identify what the most commonly used payment methods are in the regions you operate. This will help you prioritize which local payment methods to offer and ensure you are catering to the needs of your customers. By understanding the preferences and habits of your target customers in different regions, you can identify the most popular local payment methods.
Once the preferred local payment methods are identified, you can then work on integrating those methods into your payment systems. This could be through partnering directly with local payment providers or choosing a booking and payment platform that supports multiple payment methods.
Offering local payment methods in your travel business is a strategic move towards creating a frictionless, customer-centric experience that can positively impact your bottom line. It not only helps customer satisfaction by adding comfort and familiarity to the payment process, but it also helps foster trust, increase conversion rates, reduce fraud, and solidify your competitive standing in various local markets. But it’s important to remember that a one-size approach definitely does not fit all. Identifying your travelers’ needs, and putting these at the heart of your business’s payment strategy, is the key element offering payment solutions that will help your business grow.
