European travel sector faces payment system inefficiencies

A recent study by Modulr, an embedded payments platform, reveals significant inefficiencies in the payment systems within the European travel sector.

The research indicates that 96% of European travel leaders find their current payment processing systems inadequate. These inefficiencies lead to increased fees and waste valuable company time, with nearly 44% of businesses reporting over 1.5 hours lost per employee each week. Larger organisations often see this figure rising to more than two hours per employee weekly.

Consumer travel payments have evolved with advancements such as mobile wallets and Open Banking. However, business-to-business payments remain affected by outdated and fragmented systems. According to the research, 97% of respondents are certain their businesses waste resources due to inefficiencies in payment processing, while 91% do not perceive growth opportunities with existing payment systems.

Almost one-third (28%) of travel businesses report losing customers or experiencing increased fraud due to these issues. Additionally, more than a quarter (27%) cite avoidable fees and restricted market access as factors limiting growth opportunities. Concerns around competitive pressures, technological changes, regulatory shifts, fraud risks, and rising costs are prevalent, with over 90% of respondents expressing anxiety and around 40% describing their concerns as extreme.

"Access to efficient payment services for travel businesses is fundamental to continued growth in the sector," stated Jakub Zmuda, Director of Strategy at Modulr. "Our research shows a sector caught in a perfect storm of manual processes, rising fraud risks, and growing customer expectations – all while battling to stay competitive in a rapidly evolving marketplace. This isn't just about regaining the hours lost to inefficiencies; it's about rethinking payment strategies to foster critical partnerships, streamline costly operations, and unlock the potential for growth and resilience in a hugely competitive global market."

Geographical differences were also highlighted in the study. In the UK, manual reconciliation issues are most prevalent, with 60% of travel companies spending between 21-30 hours weekly on these tasks, nearly double the time compared to France, where it stands at 34%. Italian businesses report higher inefficiencies in hours spent per person on payment tasks, with 25% of teams losing more than three hours per person weekly, in contrast to just 5% in the UK.

Despite the potential benefits of automated systems, only 17% of surveyed businesses use automatic supplier payments. Most prefer processing payments in bulk (64%) or on an ad hoc basis (19%), which can lead to issues with suppliers and perpetuate inefficiencies. While virtual cards are regarded as a promising future solution for travel payments, only 60% of respondents believe they function effectively in their current state, with 40% advocating for improvements to realise their full potential.

Zmuda added, "The time for positive change is now – the solutions are already out there. Travel businesses must adapt by prioritising automation, staying nimble and responsive to market needs as part of their payment strategies. As traveller expectations evolve, embedding payments solutions that offer a mix of seamlessly connected payment options will be essential for managing the complex and fragmented nature of global travel payments."