Benefits of bitcoin in travel
Time for airlines to minutely scrutinize bitcoin as an option for commerce
Bitcoin is an attractive option for airlines, be it for lower transaction fees, relatively quicker money transfer or even the sheer experience of using a digital currency. Ritesh Gupta, Airline Information Correspondent finds out more about this emerging option
Technology and devices continue to surprise us, delight us.
Be it for the paucity of time, convenience or pure indulgence, travellers are embracing alternative payment methods.
And bitcoin is definitely one such emerging option that gained traction last year. The idea of mobile bitcoin wallet sounds cool, with info including transactions getting updated in real-time.
Travel companies, including airlines and OTAs, are today accepting Bitcoin and other digital currencies. The biggest development is the rise of payment processing platforms that make it simple for airlines and OTAs to accept Bitcoin in a simple and risk-free manner, says Reading, UK-based Akif Khan, VP Solutions Strategy, Bitnet Technologies.
Strengths
There is a definite trend for airlines and OTAs to be exploring non-card payment types. Be it for lower transaction fees, expanding reach or combating fraud, there are several aspects that are proving to be promising for bitcoin.
As Khan says, the drivers for this will vary depending on the airline and OTA. "For some, the driver is cost, as they seek to encourage travellers to pay with payment types that charge less than the 1-3% typical of cards. For others, it is about expanding into new and emerging markets, where card penetration may not be high. Finally, for some, it is about brand differentiation, and offering new avenues to pay for travellers that differentiate the airline and OTA from competitors," he explains.
Even as there are some concerns about this currency’s volatility, accessibility, creating right awareness (especially the perception of bitcoin being meant for buying illicit drugs) and the uncertainty surrounding regulation, there are clear benefits too.
One shouldn’t ignore the prowess of bitcoin especially when it comes to the economic inclusion of those underserved by the current banking system.
Bitcoin has multiple benefits for an airline or OTA compared to more traditional payment methods such as cards, says Khan. He explains: "First, it is typically cheaper to process a bitcoin payment than it is a card payment. Second, unlike cards there is no chargeback risk when accepting a payment in bitcoin, which leads to further cost savings for the airline or OTA. Third, there is no cross-border friction when accepting bitcoin, since it is a truly borderless global payment type.
"From a traveller’s perspective, paying with bitcoin can be quicker and simpler than keying in a card number. In addition, due to the elimination of chargeback risk, airlines and OTAs can accept your payment with confidence," he says. This eliminates the many situations where travellers are inconvenienced when an airline or OTA rejects their card transaction because they suspect it might be fraudulent – for example if the traveller is making the card payment whilst in a foreign country. "Finally, over 2.5 billion in the world do not have access to traditional financial services like credit cards. However, if they have Internet access via their phone, they can get bitcoin. So many travellers will actually be able to book online for the first time, benefitting both them and the airline/OTA," says Khan.
Where are savings going?
One critical question as a traveller I would like to know is – are travellers going to save any money, or is it only airlines who are going to benefit in this regard?
Khan says some airlines or OTAs may choose to keep the cost savings entirely for themselves, but the smarter ones will use the cost saving to incentivise travellers to pay with bitcoin.
The huge cost savings for airlines and OTAs not only in processing fees but also in not having to apply costly fraud management checks, mean it is in the interest of the airline or OTA to encourage the travellers to pay with bitcoin. This could be done by offering discounts when paying with bitcoin (the opposite of surcharging for credit card use, in fact) or offering frequent flyer bonus awards for example when bitcoin is used.
Key considerations
Khan recommends that airlines should think carefully about whether they want to implement bitcoin processing themselves, which would likely involve them having to process or store bitcoin, or whether they want to use a processing gateway which converts the bitcoin to local currency on behalf of the airline or OTA. In addition, if a processing gateway is being used, the airline or OTA needs to consider whether the gateway is optimized for use in the travel industry with respect to reporting, reconciliation, security, high availability, and connectivity to the appropriate travel ecosystem platforms.
As for the volatility of bitcoin, Khan says the same can be abstracted away from the airline or OTA if they select the right payment processing partner. Such entities take on any volatility risk, and guarantee the airline their ticket price when a purchase is made. The bigger challenge is that consumer adoption is still relatively modest, albeit growing rapidly. However, since the implementation costs are modest, it makes financial sense for airlines and OTAs to accept bitcoin even if only for a subset of their transactions, as this will further drive consumer awareness and adoption, leading to even greater cost savings for airlines and OTAs accepting bitcoin.
TravelMole Editorial Team
Editor for TravelMole North America and Asia pacific regions. Ray is a highly experienced (15+ years) skilled journalist and editor predominantly in travel, hospitality and lifestyle working with a huge number of major market-leading brands. He has also cover in-depth news, interviews and features in general business, finance, tech and geopolitical issues for a select few major news outlets and publishers.
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