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Understanding of embedded finance in travel is still developing
When asked about ‘embedded finance’ - defined as natively embedding financial services like short-term credit, insurance or payments services into the digital experiences travel companies offer – some 21% said they already do it today.
A further 29% said they plan to offer embedded finance services in the future.
Interestingly, 35% said they didn’t know if their company would move forward with embedded finance, suggesting a significant number of payments professionals in travel either haven’t yet made the case within their company, or are still considering the option. This is unsurprising as the trend remains relatively new.
A not insignificant 15% told researchers they don’t plan to offer embedded finance services in the foreseeable future.
This is notable, as this area represents one of the most significant trends in fintech, with travel often cited as an industry with the biggest opportunity to benefit from embedded finance services that help drive additional margins and improve the overall traveler experience.
Embedded finance services with greatest potential in travel:
Very few respondents view more traditional banking products as options travel companies will offer.
For example, just 4% said current accounts and 2% savings accounts hold
relevance and potential for travel companies. No respondents to the survey
foresee travel companies offering mortgages.
Again, 32% of respondents said they weren’t sure which services held the
greatest potential and relevance for travel, suggesting knowledge and work
on embedded finance in travel is still developing.
This uncertainty was underlined when respondents were asked about the
barriers to embedded finance in travel.
Top barriers to wider roll-out of embedded
finance in travel:
%
Lack of understanding about
embedded finance in travel
%
Technical challenges of bringing embedded
finance into digital travel experiences
%
Lack of suitable partners to provide
the underlying financial services
%
Embedded finance
partner costs are too high
%
Travel companies
have other priorities
%
Lack of traveler demand
for embedded finance
Most notably, very few respondents said traveler demand for embedded finance is a barrier, suggesting the industry believes travelers would benefit from, and purchase, finance products from their travel company.
Instead, barriers in this area relate to the technical challenge of bringing embedded finance into the digital travel experience, combined with a lack of partners able to help with this technical challenge. Again, payments experts cited a general lack of understanding about the potential of embedded finance across the industry as the top barrier to progress in this area.
Despite the general uncertainty identified by this study, industry developments suggest it is already making an impact in travel. Indeed, ‘Options-based’ products like Premium Disruption Assistance and ‘Cancel for Any Reason’ have helped global travel platform Hopper to drive ancillary revenue. The platform’s success with options-based products haves been so successful it is now providing them to other travel companies via its B2B division, HTS (Hopper Technology Solutions).
The company said recently that its B2B division, which includes its embedded fintech services and other travel technology solutions, now accounts for two-thirds of its entire business. In a recent deal, Air Canada began offering HTS’ ‘Cancel for Any Reason’ product to its passengers. Just as it sounds, the new feature offers the airline’s customers a la carte refundability, truly for any reason.
If the traveler exercises the product, they are refunded 100% by HTS via the payment method they select.
“Our industry is in
an ideal position to
lead the way with
embedded finance.”
Damian Alonso
Head of Commercial and Partnerships
Outpayce from Amadeus
