Embedded Finance Powered Transformation Across Travel – Airlines, Surface Travel, Attractions and Wellness

Financial experience impacts overall customer satisfaction across travel verticals. While prior analysis discussed intermediaries, lodging, shopping, food and dining, this article focuses on airlines, surface travel modes, attractions and wellness.

Embedded finance in airlines

Global airlines market value is expected to record a 7.4% CAGR during 2023-2028 to reach over USD1 trillion, of which 80% is expected to be conducted online by 2028

^{Source: Euromonitor International Travel System}

An increasing tendency for online transactions means that airlines have to diversify payment options, for both direct sales and intermediaries.

Reconciliating and reporting transactions is a multitude of costly payment processes within airlines. The International Air Transport Association (IATA) noted the complexity of payments, especially when needing to be customer-centric, and launched “IATApay” to facilitate payment orchestration and instant bank transfers. Providing seamless integrated payment solutions will be a key focus in the medium term. Malaysia Airlines has collaborated with IATA’s “IATApay” and introduced “MHPay” as an alternative payment method for ticket sales and ancillary products and services.

Besides insurance, airlines are partnering with financial organisations (i.e. teamwork between Southwest Airlines and PayPal) for fast payout of compensation to consumers on flight delays/cancellations. With manual approval and distribution, existing methods including vouchers are challenging to scale, fallible and tedious.

Airlines are keen to further integrate payment solutions to build loyalty at the same time while enhancing internal processes. Singapore Airlines (SIA) has partnered with Mastercard to extend Mastercard’s Priceless platform to SIA’s KrisFlyer members for lifestyle rewards. This partnership also helps SIA to streamline data analytics, fraud detection and payment processes.

Cathay Pacific also hopes to achieve better efficiency in its cargo business, working with Pay Cargo in Asia Pacific for B2B digital freight payment solutions to streamline payment settlements with freight forwarder partners.

Embedded finance in surface transport

Growth in cashless payments is critical to sustain a 10% global value CAGR over 2023-2028 of travel spending on surface transport

^{Source: Euromonitor International Travel System}

Besides embedded banking, financial operators have been promoting cashless payments, especially contactless card/QR/biometrics (face/palm) payments, across rail, bus and taxi.

It is tough to switch railway operators for domestic travellers’ regular commuting, while switching cost for banks is low. To grow the customer base indirectly, SBI has offered embedded banking services to Keio since 2023, while Rakuten Bank teamed up with East Japan Railway in 2024. Railway operators can also enhance customer loyalty, while diversifying revenue streams.  Furthermore, with administrative fees (ie. SGD 0.60/day for foreign-issued cards in Singapore), contactless credit cards addressed the challenge of purchase-reload-return pre-paid cards on trains and buses. Western card operators have been expanding payment partnerships with transport operators in Hong Kong and Japan (powered by Quadrac, a FinTech). Kumamoto Japan will discontinue pre-paid cards, while Apple Pay has integrated virtual pre-paid cards. Meanwhile, UnionPay expands in Europe, partnering with Nexi in Italy.
Moreover, companies including Tencent have been experimenting with embedding palm-print scan payment in subways, addressing the low usage of face scan payment caused by privacy concerns.

For taxi as part of in-destination mobility spending, unlike London and New York (most taxis are equipped with card payment without surcharge), Asian cities are traditionally not as tourist-friendly. In 2023, Tencent and Ant Group established partnerships with card operators to enable linkage of foreign cards to WeChat Pay/AliPay, addressing the issue of mostly digital wallet acceptance by taxi. In Hong Kong, Octopus, CabCab and Wonder attempted to install POS terminals, but only made progress with new taxis. Existing fleet drivers are reluctant to upgrade hardware without subsidies.

Embedded finance in attractions and wellness

Attractions, especially theme parks, operate a broad range of businesses from ticketing, memberships, souvenirs shops, restaurants to hotels. They face challenges to standardise the payments across outlets to give a consistent travel experience. They also need automated and integrated solutions to enable real-time analysis of income and staff planning. Merlin Entertainments (parent of Legoland) partnered with Adyen to integrate solutions and aggregate payment methods across its outlets.

Cross-border payment is another challenge. Besides serving Universal Studio in Japan, Ant Group expands merchant network of AliPay+ in Germany, preparing for UEFA Europe 2024. Attracting tourists, Ticketmaster collaborates with PayPal to ensure consistent consumer payment experience across events including concerts, while FestiPay teamed up with F1 Bahrain International Circuit to power cashless payments.

In wellness, relaxation and medical tourism are two key areas. Collinson Group teamed up with Visa, PayPal, Revolut, and iCoupon to operate SmartDelay+, an airport lounge access service for travellers with delayed flights. To provide cross-border payment convenience to Indonesians visiting Malaysia for treatment, JCB teamed up with Sunway Healthcare. In South Korea, ICB (ZeroPay) enabled acceptance of UnionPay (2022) and AliPay+ (2023), benefiting tourists from China, Hong Kong, and Thailand, among others.

Challenges and opportunities

Comparing across above verticals, key challenges include lagging financial experience and transaction fees. Slow, failed or unsecure payment experience leads to high drop-off rates.

17% of global respondents complained that the “checkout process was too long or complicated”

^{Source: Euromonitor International Voice of the Consumer: Digital Survey, fielded in 2023 (n= 20,079)}

Travel companies can conduct customer struggle analysis to identify improvement areas. In addition, performance benchmarking studies can be conducted among vendors to identify the right candidate.

Merchant fees include Point of Sale (POS) installation fees, and transaction fees including merchant discount fee (MDR). Software POS (SoftPOS) vendors such as Adyen convert phones into SoftPOS terminals, eliminating the hardware expense.

Merchants, including taxi fleets, usually transfer card transaction costs to customers, incentivising non-card payments. In contrast, large corporates including airlines hope to keep the credit card transaction fees to sustain loyalty programmes to drive customer engagement (ie co-branded cards by Delta and American Express). It might need an approach to differentiate the transaction fees to incentivise cashless transactions.

In conclusion, financial organisations may take a vertical/segment approach to understand pain points and power travel partners for transformation to keep ahead of travel trends.

Read our report, Embedded Finance Ecosystem: Mapping the Path to Services Industries’ Transformation for further analysis.