“Orchestration” is an overly complex word used to describe something that’s actually quite simple. Where payments are concerned, “orchestration” is all about removing layers of complexity to make automated decisions that ensure each payment is processed in the best possible way.
Large travel merchants understand payments can be costly and difficult to manage – imagine an airline or online travel agency that needs to accept payments across hundreds of different markets. Merchants of this scale typically need to accept hundreds of local payment methods, establish relationships with multiple different acquirers or fraud partners and build all the technical connections necessary to support such a global set-up. Then they need to harmonize data collection, analytics and reporting to provide actionable insight into their payments flows. It’s no simple matter.
That’s why platforms have emerged that cater to travel company needs with pre-built connections to partners, easy-to-use analytics and artificial intelligence-powered orchestration. It’s this logic that allows the merchant to set rules to guide how each payment is treated and to dynamically adjust those rules as the environment changes. For example, if the travel brand receives a card payment in Germany through its website, it might be routed to acquirer A because they offer the best rate for handling that specific type of card. This is a step forward for most merchants in travel but it’s still just scratching the surface of what’s possible.
Travel is different to most other industries, and our sector has access to data insights that can help with a wide range of automated decision-making, including how we handle payments. Looking at each payment in terms of acquirer fees alone is one-dimensional. What about the broader costs involved in the end-to-end payment, like reconciliation? Or the risk profile of a payment? Handling a card-not-present payment originated in a market with significant levels of fraud carries a very different risk profile to a strong customer authenticated payment made in Europe using biometrics. It’s such additional layers of insight that can help the industry make better payments decisions.
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But most importantly, what about the nature of the purchase? This question should be extremely important to payments decision-making in travel. It should be the north star that guides how payments are orchestrated. Particularly so for some airlines, where 20% of the sales they make can account for most of the profitability. But in an industry that’s invested heavily to personalize the experience it offers to travelers, we’ve largely overlooked the potential to personalize how we deal with payments.
The importance of the trip context is best exemplified through B2B payments. Airlines and hotels are often paid by travel agencies using a variety of virtual cards. Different cards carry a wide variety of acceptance costs, and travel providers have often taken steps to limit the costs associated with the more expensive cards used by travel agents to make payments. But very few have done so in a way that considers the context of the trip. If an agency brings a business class traveler for a long-haul flight with multiple ancillary services – that’s likely to be a high-margin booking the airline really wants to serve. Declining that type of business because the payment is a little costlier to accept doesn’t make much sense.
When trip context is used in conjunction with payments decision-making then there’s an opportunity to treat each payment in an optimal way. There are a wide range of parameters that should inform this type of decision. For example, what are the acquisition costs of this particular booking? Is the purchase made on a city-pair of particular interest to the airline? What’s the risk profile associated to this payment? With this level of context, airlines can more fully understand the value of the underlying purchase, and travel agents can make payment with an appropriate method for that particular booking.
That’s why payment decisions need to be personalized in a way that factors in the nature of the payment and the underlying booking. Almost every area of the travel industry is in the process of digitally transforming payments. Whether it’s travel agencies becoming the merchant of record and paying suppliers more efficiently, airlines investing in frictionless payments across the entire trip to support retailing ambitions or hospitality chains unifying fragmented approaches to payments across properties. In each of those scenarios, the basic principle holds true that a payments strategy won’t deliver maximum value until the orchestration layer is powered by an understanding of both the payment and the trip.
