Globalization has transformed the world of business into a cross-currency, cross-border marketplace.
But travel is arguably the original cross-border payments industry. A travel agent in New York needs to make payments to hotels in Melbourne, Australia, or anywhere in the world, and vice versa.
The transaction requires a solution that guarantees security and simplicity enabling the movement of thousands of payments and travelers across borders quickly. Virtual cards in the early 2000s helped to propel online travel agencies and hotels forward, providing operational efficiencies, cost savings, and peace of mind for customers and suppliers alike.
As the U.S. travel payments industry continues to advance, emerging geographies are taking a slightly different approach. Without the dependence on legacy payment systems like those in America and Western Europe, these markets are leapfrogging into virtual payments with substantial success.
Tremendous amounts of money and technology are being applied in emerging markets. Such is the case in India, where the government recently pulled 86 percent of the paper currency out of circulation in order to transition to digital payments. The most recent innovation is CMS-managed ATMs in Mumbai, which allow people to pay bills, book flights and purchase tickets without physically using a debit or credit card. ATMs with these multifunctional capabilities could eventually become one-stop shops for all payment-related actions.
In West Africa, countries are rolling out new digital currencies, including Senegal, that is expected to launch a new digital currency that relies on blockchain this year. If successful, it will be adopted across the region and integrated with existing mobile platforms.
African countries are considered to be leading the world in their adoption of mobile payment services, specifically people in remote areas who are increasingly using mobile services. There are beliefs that the adoption of mobile services in African countries could lead to a reduction in poverty. When there is inclement weather, it can be hard to get paper money to remote villages. The adoption of virtual payments eliminates this need and the hassle that comes with it.
The implications of these innovations extend beyond the travel industry. They can support more advanced local economics and help to address poverty in communities. It also opens up important discussions on regulation and secured networks. The balance between regulation and stewardship can be tricky; however, governments and industry are working to safeguard and support the free flow of ideas and innovation.
Today, the acceptance of virtual cards is ubiquitous. The control that the payment method offers by setting monetary amounts on merchant-specific cards that are only used once and then terminated has driven wide adoption within the travel industry by corporate business and merchants. Corporate travel management companies can save money and time by using VCNs. FX rate markups and cross-currency transaction fees can add additional expenses and wire transactions can range from $10 to $25 per payment.
Looking to the future, virtual payments will continue to adapt to new platforms like mobile and blockchain. While B-to-B hasn’t fully moved to mobile, some of the technology underpinning mobile such as the use of tokens is one way some companies are adding another level of security.
But all companies will need to focus on more alternative technologies and closely track how they impact the payments ecosystem. The industry and global marketplace is challenging all payments providers and organization to create more advanced platforms that not only make moving money more secure and seamless, but also emphasize the user experience.