Most travel companies know what they pay to accept a customer transaction. Processing costs are tracked, benchmarked, and negotiated closely, and for good reason.
Phocuswright found that credit card fees average between 2% and 3.9% across geographies, with 40% of North American travel companies surveyed paying between 3% and 3.9% per credit card transaction.
But every travel booking involves money moving in two directions. A customer pays for the booking, and the travel company pays the hotels, airlines, tour operators, and other suppliers that fulfill it.
Those payment flows are part of the same business transaction, yet their economics are often managed and evaluated separately. A company may know exactly what it costs to accept customer payments without seeing how those costs compare with the value generated when it pays suppliers.
The cost of accepting a payment is only half of the payment equation.
Why Travel Payment Processing Becomes Fragmented
Travel payments are complex by nature. Companies need to accept different payment methods from customers while paying large networks of suppliers, often across markets, currencies, and payment preferences.
Over time, that can lead to a fragmented payment setup, where customer payments and supplier payments are managed separately through different providers, systems, or commercial arrangements.
The impact can reach the bottom line. A study from Skift and Airwallex surveyed 473 travel executives across seven global markets and found that 66% said outdated or complicated payment systems were affecting organizational efficiency and profit margins. Among those reporting margin erosion, nine in 10 said the impact was at least 2%.
There is another financial consequence that can be easier to miss.
Customer payment acceptance is typically evaluated around processing costs, interchange, fees, fraud, and authorization performance. Supplier payments may be managed around payment delivery, payment method, virtual card acceptance, and rebate earnings.
Both sides may be closely managed. The problem is that improving each independently does not necessarily tell you what your payments are contributing to the business overall.
For a deeper look at the broader costs associated with disconnected payment systems, read our guide, The Hidden Cost of Disjointed Payments: A Quantification Guide for Travel Agencies.
Start With What It Costs to Get Paid
On the customer side, the economics are fairly familiar.
A card transaction comes with interchange, network fees, payment provider fees, and potentially other costs. The final amount depends on factors such as card type, transaction size, payment volume, cross-border activity, payment mix, and commercial terms.
At travel volumes, relatively small differences can become significant. Phocuswright's research found that roughly four to five in 10 travel companies across major markets strongly agreed that card processing fees were too high.
It makes sense that finance and payment teams scrutinize acquiring costs, negotiate rates, and look for opportunities to improve their payment mix.
But once the customer has paid, the travel company still has suppliers to pay.
Supplier Payments Have Their Own Economics
Travel companies also move significant payment volume to hotels, airlines, tour operators, and other suppliers.
Those payments may be made by virtual card, ACH, bank transfer, or other methods. The method chosen affects payment delivery, control, reconciliation, and cost.
Virtual cards are especially relevant in travel. Phocuswright describes VCCs as becoming a de facto payment choice for B2B travel transactions.
Eligible virtual card payments can also generate interchange rebate earnings for the company making the payment.
For a travel business already sending millions of dollars to suppliers, those rebates can become a meaningful source of incremental revenue. They can help offset the costs incurred when accepting customer payments and, depending on the economics, generate revenue beyond those costs.
This is where evaluating the two sides separately can obscure the bigger picture. How often are customer payment costs evaluated alongside the revenue generated when the business pays its suppliers?
Put Customer and Supplier Payments on the Same Financial Page
Consider a travel company processing $100 million in customer payments each year. There is a cost associated with accepting that volume, driven by its card and ACH mix, transaction profile, pricing, and other factors.
That same company may also send tens of millions of dollars to hotels, airlines, and other suppliers. If eligible supplier payments are made by virtual card, some of that volume can generate rebate earnings.
Looking at the acquiring rate alone leaves those earnings out of the analysis.
A few basis points saved on customer payment acceptance can matter. So can increasing the amount of supplier spend generating virtual card rebates. Supplier acceptance, payment mix, average booking value, and commercial terms can all affect the outcome.
For finance leaders, the useful question is broader:
What are we spending to accept customer payments, what are we earning when we pay suppliers, and what does that mean for our overall payment economics?
The answer will be different for every travel company.
Payment Decisions Can Become Margin Decisions
At travel scale, even modest improvements in payment economics can add up.
A fraction of a percentage point applied across millions of dollars in annual customer payment volume can have a meaningful impact on cost. On the supplier side, increasing the amount of existing payment volume that generates virtual card rebates can create additional revenue without requiring additional bookings.
That is why payment strategy deserves to be viewed through a financial lens.
How much customer volume is paid by card versus ACH? What does it cost to accept those payments? How much supplier spend is eligible for virtual card? How much of it is generating rebates today?
Looking at those numbers together can reveal opportunities that are difficult to see when acquiring and supplier payments are evaluated independently.
Connecting the Economics Across PayIns and PayOuts
ConnexPay brings customer payment acceptance and supplier payments together on one platform.
For travel companies using both PayIns and PayOuts, incoming customer payments can support outgoing supplier payments. This connects two payment flows that are traditionally managed separately, while allowing customer payment costs to be considered alongside the rebate earnings generated through supplier payments.
Instead of optimizing each side independently, finance and payment teams can see how decisions across the payment flow work together. Payment mix, acceptance costs, supplier payment methods, virtual card utilization, and rebate earnings all contribute to the overall financial result.
Put Your Own Numbers to It
Industry benchmarks provide useful context, but your own payment volume, mix, and booking profile tell you much more about the potential opportunity for your business.
The ConnexPay ROI Calculator was built for U.S. travel companies to put their own numbers to the equation.
Enter three inputs:
- Annual customer payment volume
- Percentage of customer payment volume paid by credit card
- Average booking value
The calculator compares the estimated cost of a typical fragmented U.S. travel payment setup, where customer and supplier payments are managed separately, with ConnexPay's unified approach. The estimate considers payment processing costs and supplier payment rebate earnings to calculate your potential annual savings.
How much are your payments really costing you?
