The travel industry is built on cross-border payments—a transaction where the payer and recipient are located in different countries. The ability to accept cross-border payments is an operational must-have for tour operators, airlines, travel technology platforms, destination management companies, cruise operators and accommodation providers. However, without careful management and optimization, they're notoriously complex and costly.
Consumers are spending more regularly cross-border than ever, with cross-border payments expected to reach $250 trillion by 2027. Travel merchants who overcome this complexity by reducing hidden fees and making the booking process easier for travelers are setting themselves up for success.
In this article, we explore the following:
- What are cross-border payments?
- Why are cross-border payments challenging for travel and tourism companies?
- What are the benefits of optimizing cross-border payments?
- How can travel and tourism companies navigate payment security, compliance and regulations?
- How do you choose the right cross-border payment processing solution?
- Why Repayd is the ideal travel merchant account solution to simplify cross-border payments?
What Are Cross-Border Payments?
Cross-border payments are financial transactions in which the payer and the recipient are located in different countries.
Here's how cross-border payments generally work in the travel sector:
- Payment initiation: A customer initiates the payment in one country through their bank.
- Verification: The payment information is sent via an encrypted gateway to obtain authorization to debit the funds from the sender's bank account.
- Payment routing: The sender's bank routes the payment to the recipient's bank—this can be directly or through one or more intermediary banks, depending on the payment method used.
- Currency conversion: The funds are converted to the recipient's currency at the applicable exchange rate.
- Payment settlement: The recipient's bank receives the funds.
- Fees and charges: Cross-border fees can include transaction, currency conversion and bank fees, which vary by financial institution and payment system.
Each step of this process is a potential point of friction, not to mention the fees that chip away at your already thin profit margins. Managing this complexity requires a more specialized travel-specific solution than a standard merchant account.
Why Are Cross-Border Payments Challenging for Travel and Tourism Companies?
Selling travel services across borders means navigating a complex regulatory landscape, currencies and banking networks. While expanding globally opens up new revenue streams, it exposes travel companies to a unique set of risks:
Fees and Charges
In a high-volume, low-margin industry like travel, fees really matter. Cross-border payments come with several fees, including:
- Payment processor fees (typically 1.3% to 3.5% of the transaction value)
- Foreign exchange (FX) fees (typically 1% to 3% of the transaction value)
Across hundreds of bookings, these fees very quickly eat into your margins.
Fraud and Security Risk
The global travel industry loses over $25 billion every year to fraud. High-value bookings, reliance on card-not-present transactions and complex international supply chains make cross-border payments a prime target for fraudsters searching for security vulnerabilities.
Checkout Friction
Travelers want to pay for travel services with their preferred payment methods – not catering to your customers' payment preferences creates friction and ultimately leads to abandoned bookings.
Payment Delays
Some payment methods, such as bank transfers, are slow and often arrive without the key information finance teams need to complete reconciliation, resulting in payment delays.
Regulatory Challenges
Navigating the regulations of one country is challenging enough, but travel providers serving international customers must ensure global compliance.
The friction inherent in global transactions, from fees eroding thin margins to payment security risks, creates a barrier to growth. Overcoming these challenges is essential for travel companies protect their revenue and ensure a frictionless customer journey.
What Are the Benefits of Optimizing Cross-Border Payments?
Many travel companies see international payments as a ‘set it and forget it’ task, leaving them vulnerable to hidden fees and high abandonment rates. Optimizing cross-border payments, on the other hand, offers the following benefits:
Increase International Sales by Introducing Familiarity
Customers hesitate to complete bookings when asked to pay in a foreign currency. It creates uncertainty and friction, and this may prompt them to take their business elsewhere. When you display prices in travelers' home currency and accept payment in their currency, it feels familiar, making it easier for them to complete their booking. This translates into higher booking volumes—a necessity for a high-volume, low-margin industry.
Then there's the problem of limited payment methods. One study found that when businesses add just one additional relevant payment method beyond cards, they see a 12% increase in revenue and a 7.4% increase in conversion rate. If you've expanded into the Chinese market, for example, let your customers pay with Alipay or WeChat Pay, two of the most popular payment methods in the region. Your bottom line will thank you.
Reduce Cross-Border Fees and Keep More of Your Revenue
Processing international credit cards through a standard merchant account triggers costs that, with high booking volumes, add up over time. The answer to this problem is local acquiring, which can reduce costs by 1% and increase approval rates by 5%-15%, allowing you to keep more of your money.
Improve Checkout Conversion by Removing Friction
Payment friction drives up to 94% of abandoned bookings. Since the checkout page is the final hurdle of every sale, removing friction is one of the most direct ways to protect your revenue. Even an excited and motivated traveler might stop in their tracks if they encounter a payment process filled with obstacles.
Displaying prices in the customer's currency, offering local payment options, being upfront about all applicable fees (no leaving fees until the end!), and integrating 3D Secure thoughtfully create a smooth, secure checkout process that encourages customers to click ‘Pay Now.’
Scale Your Business Without Boundaries
Expanding into a new market traditionally involved setting up complicated legal entities and establishing local banking relationships. These processes could take months or even years to complete, delaying or even discouraging travel businesses from growing into new markets.
Today, however, you can enter a new region by using a travel merchant account optimized for local regulations and payment preferences. That way, you can start accepting bookings quickly, significantly shortening the time it takes to expand your business into new markets.
How Can Travel and Tourism Companies Navigate Payment Security, Compliance and Regulations?
Navigating international payment regulations and security threats is challenging, particularly for travel businesses that process payments from travelers worldwide.
Security and Fraud
Cross-border payment security is the top concern for travelers, outweighing cost concerns. Visa surveyed 6,500 consumers and found that 90% expect robust fraud and security measures, with 75% of Gen Z consumers having stopped a cross-border payment due to security concerns.
This isn't too surprising when you consider that 88% of respondents to a study on the topic reported being a victim of payment fraud. The travel sector is a prime target for fraudsters, and cybercriminals target cross-border transactions because the process is opaque and convoluted. This allows them to exploit vulnerabilities in specific banks and countries.
On top of that, there's the issue of chargebacks. Travel and hospitality businesses experience an average chargeback value of $120, significantly higher than gambling and gaming ($99) and retail ($84).
Travel's persistent fraud and chargebacks problem requires a robust, multi-layered approach:
3D Secure (3DS)
Implementing 3DS 2.0 allows you to verify that the person using the card is the actual cardholder rather than a fraudster. The latest version of 3D Secure is a significant improvement, with more accurate fraud decisioning and stronger chargeback protection.
Tokenization
By replacing sensitive card data with unique tokens, you ensure that even in the event of a data breach, customer financial information is unreadable and therefore useless to cybercriminals.
Real-Time Transaction Monitoring
Proactive screening tools analyze transaction patterns as they happen. By tracking transaction velocity, geolocation and more, you can stop and block anomalies.
Regulatory Compliance
When choosing a suitable travel merchant account provider, compliance should be top of mind. Consider providers that allow you to comply with the following requirements:
PCI DSS Level 1 Compliance
Companies handling card data must adhere to the Payment Card Industry Data Security Standard (PCI DSS) to ensure cardholder data is stored, processed and transmitted securely.
PSD2 and SCA
The Second Payment Services Directive (PSD2) and Strong Customer Authentication (SCA), which mandate two-factor authentication for electronic payments, are legal requirements in the UK and EU.
Choosing the Right Cross-Border Payment Processing Solution: Features To Look For
Finding the right travel merchant account is about more than ticking boxes—you need a specialized solution that was built to handle the unique nature of travel payments. The right cross-border payment processing provider will offer capabilities that help your business grow, including:
Cross-Border Payment Cost Optimization Capabilities
A travel merchant account provider focused on cost optimization will help you reduce the fees typically associated with cross-border payments. Using customer data, acquirer selection and intelligent transaction routing, a travel merchant account provider can help you lower processing fees while improving authorization rates.
Chargeback Management and Financial Protection
Chargebacks are a significant drain on your cash flow, particularly when bookings are made months in advance. By working with a travel payment provider that pairs chargeback management with insolvency protection, you safeguard your income and maintain your high standing with banks.
Diversified Acquiring to Reduce Risk
Relying on a single acquirer creates a major point of failure for your business. If a bank suddenly changes its risk appetite or updates its policies, your ability to process payments could disappear overnight. By spreading across multiple partners, you ensure that you always have access to stable processing.
Travel-Specific Cross-Border Payment Expertise
A successful travel payments strategy demands more than technology—it requires a dedicated partner who understands the realities of long lead times, cross-border payment complexity, and changing regulations. Working with a travel merchant account provider that specialises in cross-border payments:
- Speeds up problem resolution with industry-specific expertise.
- Keeps you ahead of changing regulations by monitoring developments and advising you on adjustments.
- Improves efficiency by optimizing payment flows and reducing friction.
- Builds a long-term partnership with a team that knows the ins and outs of your business.
Repayd: Seamless Cross-Border Payments For Travel Companies
Scaling your travel business globally shouldn't be a headache, and we're here to make sure it isn't. Our mission is to make global payments simple, secure, and reliable for travel, hospitality, and aviation businesses worldwide. With Repayd's travel merchant account solution, you gain access to multi-currency capabilities, comply with global regulations and benefit from robust security and fraud protection—all in one easy-to-use platform.
Even better, we combine cross-border payment processing with built-in protection, including chargeback prevention, risk mitigation through diversified acquiring, and insolvency cover should operators or suppliers experience issues.
Are you ready to scale your travel business without the extra baggage? Get in touch with the Repayd team today to see how much you could be saving on every international booking.
