Consumer Payment Behaviour Is Changing; Here’s How Hotels Can Capture More Bookings
Payment processing has always been a major pain point for hotels. As new payment methods gain in popularity, things are getting even more complex.
Gone are the days when cash was king. Globally, cashless payments are set to increase by more than 80% to almost 1.9 trillion transactions from 2020 to 2025. And an ever-increasing proportion of these payments is taking place online.
As more businesses accept alternative payment methods, consumers will grow to expect them when booking hotels too. Yet the hotel industry is lagging behind.
For example, mobile bookings account for about one-third of hotel direct bookings, but the conversion rate is 50% lower than on desktop, according to D-EDGE data. The most common reason for abandonment? The payment process is too complicated.
To attract more travelers and capture more bookings, hotels must offer a diverse array of payment options and a simple, friction-free payment experience. And that starts by understanding the most popular online payment methods consumers use today.
Here are a few things you should know about them:
How they work: Cardholders make payments by accessing a line of credit issued by a bank.
Why they’re important: For most travelers, credit cards remain the preferred way to pay for hotel charges. Worldwide, the number of payment cards in circulation is expected to increase to 29.31 billion in 2023.
Popular providers: In addition to globally recognised credit card networks like Visa, Mastercard, American Express and Discover, there are many smaller, regional players like JCB in Japan, UnionPay in China and Hipercard in Brazil.
How they work: Cardholders make payments by drawing on funds directly from their bank account.
Why they’re important: For travelers, debit cards are a fast and convenient payment method with no borrowing required. Globally, the debit card market is expected to grow to $96.84 billion in 2026, although the pace of growth has slowed to about 1% per year. In 2021, Asia Pacific had the largest debit card market, followed by Western Europe.
Popular providers: Debit cards are issued by most banks as well as major credit card networks like Visa Electron and Mastercard’s Maestro.
How they work: Also called mobile wallets or e-wallets, digital wallets store credit and debit card information on a mobile device, allowing the user to make purchases online, in-app or in-person by waving the device near a payment reader.
Why they’re important: By 2023, an estimated 4.4 billion consumers will shop with a digital wallet, accounting for 52% of e-commerce payments globally. Mobile wallets are an easy, secure option for travelers because no physical card is required, a PIN or biometric identifier is needed for use, and payment information is encrypted.
Popular providers: Google Pay, Apple Pay, Samsung Pay, WeChat Pay, and Alipay.
How they work: Consumers make payments using a direct online transfer of funds from their bank account to the merchant’s account, with no card required.
Why they’re important: Instant payment transactions reached $70.4 billion globally in 2020 and are expected to grow by over 30% per year to 2024. While currently most transfers are domestic, cross-border transactions are becoming cheaper and safer, making them a more viable option for international travelers.
Popular providers. In addition to most banks, fund transfer providers include PayPal, Venmo, Trustly in Sweden, Giropay in Germany and iDEAL in the Netherlands.
Virtual credit cards (VCC)
How they work: Customers make payments using a temporary credit card number issued by a bank for a specific use or set amount, with no physical card required.
Why they’re important: Virtual cards are more secure because primary card numbers aren’t disclosed and they’re typically issued for one-time purchases. This makes them the preferred way to pay hotel charges for OTAs and many business travelers.
Popular providers: Offered to consumers and businesses by a limited number of banks.
How they work: A voucher is a print or electronic payment document with a predefined value that can be used to make payments at retailers that accept them.
Why they’re important: Vouchers are more secure than cash and allow companies to control spending.
Popular providers: Tour companies often issue vouchers to customers as payment for hotels. In some countries, governments and companies issue vouchers to citizens to subsidise holiday expenses. For example, “les Cheques-Vacances” (ANCV) in France.
Buy now, pay later (BNPL)
How it works: BNPL is a type of short-term financing that allows consumers to pay for purchases over time, usually in the form of an installment plan.
Why it’s important: BNPL payment options are quickly becoming ubiquitous as a fast and convenient way to make online purchases without paying upfront, often with zero interest. In travel, offering BNPL as a payment option can be a strong enticement to book trips.
Popular providers: Afterpay, Affirm, Klarna, Atome, Mastercard Installments and Visa Ready, among others. BNPL is quickly gaining traction in travel and is currently accepted on Expedia, Vrbo, Orbitz and Priceline and at select hotels and airlines.
How they work: Users make online payments using digital currencies through decentralised networks without the need of an intermediary or central authority like a bank or government.
Why they’re important: Cryptocurrency usage has gained traction in recent years as a digital alternative to money issued by governments. However, volatility in value and recent high-profile cases of fraud have made the general public wary.
Popular providers: Bitcoin, Ethereum and Litecoin. In the travel industry, acceptance of cryptocurrencies is currently quite rare, although that may change in the future.
The Challenges of Accommodating Diverse Hotel Payment Methods
While hotels don’t need to accept every new payment type, it’s important to accommodate the preferences of guests and target markets. However, payment methods can vary by country and region, and each has its own networks and rules. Hoteliers are often limited to the methods accepted by their bank or payment service provider (PSP).
Moreover, payment information is often scattered across multiple systems, requiring manual processing, reporting and reconciliation. This leads to inefficiencies and human error and can expose the hotel to data breaches, fraud, and chargebacks. Resolving technical issues and payment disputes can be especially challenging.
The Solution: A Centralised Hotel Payment System
To overcome the obstacles, many hotels are moving to a centralised payment management system, such as D-EDGE Pay that integrates a payment gateway with the Central Reservation System (CRS), allowing staff to manage reservations and payments on one platform.
With the right payment gateway, hotels can easily accept a broad range of payment types and can automate many of the tasks related to verification and reporting. Guests are assured a secure and seamless booking experience regardless of the payment method or online booking channel they use — website, OTA or central reservations and regardless of the device they use: mobile or desktop.
As consumer payment behaviour evolves, hotels that adapt quickly will reach more travelers, increase conversion rates, and provide guests and team members with an elevated payment experience from booking to departure.
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