How to choose a reliable payment provider for your online travel agency

Online travel agencies (OTAs) face unique challenges when it comes to payments. The industry is associated with a high risk of cancelled bookings, leading to chargebacks and payment disputes. Plans can change between holidays being booked and the date for which they are scheduled, and unexpected incidents such as cancelled flights or illness can derail customers’ plans.

For this reason, online travel agencies have different requirements and obstacles to face when selecting the right payment provider for their business. This article will walk you through the factors you’ll need to consider when putting a reliable payment processor in place.

Cross-border transactions are key for OTAs

In addition to the factors that make the OTA sector more of a high-risk proposition for payment providers, online travel agencies also need to deal with the complexity of transactions that take place in foreign currencies and across borders. 

Payment providers and payment gateways can vary in the way that they deal with international transactions. It’s important to choose a gateway that allows customers to pay using their favoured local payment methods, while managing foreign exchange loss when accepting funds in different  currencies than your home currency. 

The payment gateway you choose should ensure a smooth customer experience when checking out, no matter where in the world customers are based. Ideally this should include automatic currency conversions, which is a way of improving checkout success. With automatic currency conversions enabled, prices will be displayed in the customer’s local currency by default, but can also be changed if the customers require.

What are the different types of payment gateways?

When a customer fills out their payment details during an online checkout, the payment gateway encrypts and transmits these details to the relevant financial institutions to complete the transaction.

Payment gateways differ in the degree to which they are designed, managed and hosted by the merchant. Some types of payment gateways require more maintenance and upkeep. A larger business may have the resources to take on more of this work and as a result have larger control over the checkout experience, while smaller businesses may prefer to let the payment provider deal with the bulk of these responsibilities. Each type of payment gateway comes with its own benefits and drawbacks. 

Hosted: This type of payment gateway requires the customer to navigate away from the travel agent’s website to complete the transaction. It is very easy and quick to set up, and it allows the merchant to reduce its responsibility for compliance requirements, as it is not directly handling or storing payment data. Instead, the payment provider is taking on this burden. The downside is that it introduces some friction into the customer experience. Merchants have limited control over the design and branding of the checkout page and customers have to deal with a change of online environment.

Self-hosted: Also known as a non-hosted payment gateway, this involves customers staying on the merchant’s website to complete the transaction, and the merchant retaining full control over the customer experience. This can be more resource-intensive to set up and involve more compliance requirements, but allows for a fully customised and seamless checkout process.

API payment gateway: This allows customers to complete transactions directly on the merchant’s website, without being redirected to a third-party payment page. This allows for more control and customisation, and makes it easy to track customer data. However, it also may mean that merchants are responsible for handling the security of payment data, and they require more resources to set up.

Pricing and fees for payment gateways

It’s not always simple to calculate upfront how much a payment gateway is going to cost a business, especially as there can be additional fees that aren’t always clear upfront. When choosing a payment provider for your online travel agency, look out for the following when making your decision:

Set-up fee: This is a one-off cost that a business pays when it first creates an account with a payment gateway. When calculating set-up fees, don’t forget the labour and time involved within your own team, especially if you are going for a tailor-made, self-hosted option.

Subscription fees: For some payment gateways, there is a regular monthly or annual charge. This can be either on top of transaction fees or as a flat rate. 

Transaction fees: Many payment providers charge a small fee for every transaction that is processed. These can be a fixed amount for each transaction, a percentage of the transaction total, or a combination of the two. The amount will also vary depending on factors such as the payment method used and whether the transaction is taking place across borders.

Some gateway providers charge fixed monthly fees, others charge only for transactions, and some charge for both. While these are the main costs involved with payment gateways, there are other fees that can come as a surprise if businesses aren’t careful to factor them into their financial and operational planning. These include:

Chargeback fees: Payment providers may charge a fee to cover the administrative work involved when a customer disputes a charge and successfully reverses the transaction.

Refund fees: Similarly, when a customer is unsatisfied with the product and asks for a refund, the provider may charge a fee to cover the cost of this reversal.

International fees: Cross-border transactions often incur higher fees than domestic transactions. On top of that there can be costs associated with currency conversions; many providers offer FX rates that diverge considerably from the interbank rate at which banks lend to each other. Others, like Airwallex, are set up expressly to offer a cost-effective option for international transactions.

Security and fraud prevention in international transactions

Security is important for any online businesses, but especially for travel agencies, which usually operate internationally and can involve large transaction volumes and amounts. In order to prevent fraud and protect customers, there are certain standards to look for when choosing a payment provider. These include:

• Adhering to industry standards such as PCI DSS (Payment Card Industry Data Security Standard).

• Using advanced encryption technologies to safeguard payment data during transmission. This makes the information unreadable to anyone who intercepts it.

• Tokenising payment data for repeat customers and recurring payments. This involves replacing sensitive customer data with ‘tokens’ (meaningless strings of characters) so payment data is protected from breaches or interception. Financial institutions can unlock the payment data securely to complete the transaction.

• Using real-time fraud detection and prevention mechanisms. These monitor transactions for suspicious activities using AI and machine learning (ML). Intervention can then take place swiftly when anomalies are detected.

Additional payment provider features to check for

Integration with booking and reservation systems

Payment gateways can be integrated with other systems that are typical for the OTA industry, such as booking engines, customer relationship management (CRM) software, and accounting systems. When this integration is seamless, it can simplify operations for your team and ensure the customer journey is completed without any friction.

Strong track record within the OTA industry

Different types of businesses have different needs. Look for a payment provider that has worked with online travel agents before, or consider one that specialises in international transactions.

An optimised checkout process for mobile and web

The customer experience should be seamless and designed to maximise conversions, whether or not the transaction is taking place on a mobile device or on a computer. This means that design should be mobile-responsive, and there should be one-click payment options, as well as the possibility of checking out as a guest, to make checking out quick and easy.

The ability to mine data for insights

Payment providers should enable travel agencies to gain valuable insights into customer behaviour by analysing transaction data. This should help the businesses optimise their pricing strategies, tailor promotional offers and tweak their customer journeys.

Boost conversions with Airwallex

Airwallex can offer your travel agency secure payment acceptance on a global scale, while helping you reduce friction at your checkout and eliminate unnecessary FX costs. Build a local checkout with a local feel. Accept payments in 180+ countries and improve sales by offering travellers the ability to pay in their preferred currency. Choose the integration method that best suits your business. Use prebuilt UI components to easily create a conversion-optimised checkout, or design your own checkout experience via Airwallex’s API. 

Because travel agencies often deal with payment collection from customers located in one market and payout to travel suppliers in another, you’re exposed to a high degree of FX risk. Our wide range of solutions allow you to tap into interbank FX rates and transaction services that help you eliminate some of that risk. With Airwallex’s LockFX, you can lock in fixed rates for 1,000+ currency pairs across 46+ currencies including exotic currencies. Choose from a range of periods that the rate is valid, from one minute up to 24 hours.