Global Payments: Airbnb, Expedia, Booking.com And The Travel Industry’s 2021 Prospects

For an industry with segments so reliant on the international movement of people, cross-border payments has fared relatively well in 2020, in part pulled up by the surge in ecommerce. But in 2021, the reopening of travel will have a transformative impact on the global payments industry.

Over the next 12 months, as populations around the world gain access to vaccines against Covid-19, we will see a hesitant return to something resembling normalcy. Not quite like the word before the pandemic, to be sure, but a world where international travel and relocation is once again commonplace. 

Business people will start to travel to meet colleagues or attend conferences; migrants will return to their countries of work; expats will move country and holidaymakers will once again jet off to sunnier climes. And in the process, the flow of money moving across the world will swell. But which areas of the industry will see the biggest impact?

Airbnb, Expedia and beyond: Travel sites to boom again

Fresh off of Airbnb’s $100bn IPO, travel aggregator competitor Booking.com BKNG has now exceeded its pre-pandemic valuation and Expedia EXPE is close. Even though travel has not returned to its old levels, the markets clearly believe it will and the valuations have followed.

All of these major aggregators serve customers from around the world and offer many currency and FX alternatives as part of their user journeys. That’s on top of all the cross-border payments that happen behind the scenes paying the hotels, hosts and airlines across the world. 

With the return of travel, especially for leisure, all these payments will start to flow again. As data from FXC Intelligence shows on cross-border card pricing across 120 countries, the amounts charged for a transaction across borders vary substantially and can be up to 10% of the cost of the underlying transaction. Travel companies will therefore be paying close attention to margins as they look to maximise profitability and customer satisfaction in the reopening market as they serve customers from around the globe.

For some, this return will be coupled with pushes into emerging markets. Airbnb, for example, has said it plans to expand in India and China, which will create new payment challenges as it expands operations in countries that have a complex payments landscape. Airbnb, which has long paired its own sophisticated in-house payment system with local partnerships, is well placed to handle this challenge, but it may result in new initiatives to bolster its offerings.

There’s also the potential for a shift in which corridors see the most activity. The reopening of travel is likely to be uneven at first, with some destinations seeing unusually high levels of travel compared to pre-pandemic norms. This may be exacerbated by Expedia’s prediction of greater levels of spontaneous travel, where holidaymakers opt for last-minute trips based on availability and cost. 

Meanwhile, Booking.com predicts a rise in working holidays, where travellers capitalise on remote working to visit exotic locations without needing to use up their annual leave. 

All these factors are likely not only to increase the flows of cross-border payments, but shift trends in where money is being sent from and to. 

Travel money and the global payments industry question

As travel returns, so will the need for travel money. For the travel money space, the prospect of a resurgence in the travel industry will translate into a fairly direct return to growth. Pent-up consumer demand for holidays abroad is set, at some point in 2021, to bear fruit, and the travel section of the payments industry is therefore likely to see swelling demand.

However, industry dynamics will be different in 2021. Back in January, Travelex, the travel money giant, was brought to its knees by a prolonged ransomware attack that ultimately forced the company to pay $2.3m to regain access to its systems.

On top of this, parent company Finablr was forced into administration as large hidden debts were found. Travelex subsequently severed connections with Finablr and ceased trading in the US and Canada. And while the UK arm of the business still remains, it does so with a drastically reduced footprint. 

From boom to bust: The history of Travelex

In normal times, the loss of such a major player would have quickly been capitalized on by rivals. But these have not been normal times, and the gap that Travelex remains so far unfilled. 

In 2021, when the market reopens, this will change. But who will ultimately win out remains to be seen. Established competitors may opt to fill the retail and online gaps left by Travelex, or fintechs such as Revolut or Currensea may fill the void. We would expect to see an increased focus on online at the expense of bricks-and-mortar outlets due to the reduced risks of business expansion without physical locations and the increased consumer interest in digital products.

Whatever happens in travel money, 2021 will herald a year of change; probably a highly competitive one. 

Cards, neobanks and cross-border: A saving grace for key players

Before the pandemic hit, travel was a key differentiator for many newer entrants in the cards space, particularly among neobanks. The ability to make card purchases or withdraw money abroad was touted as a key benefit of a number of cards, including those offered by Revolut and Monzo, and were key in their impressive growth over the past few years.

In UK-based Monzo’s case, 2020 was set to be the year conquered the US, having launched in the country in June 2019. But the pandemic has severely dented its plans, with its valuation plummeting by 40% in May. 

Meanwhile, card networks also took a significant hit in 2020, with both Visa V and Mastercard MA experiencing cross-border payment volumes slump by over 40% in April. And while they recovered somewhat in the subsequent months, both remained at around 30% lower than the previous year in Q3. Since then, the gap has continued to reduce and, most importantly, the stock market values of these two leaders is now back to pre-pandemic levels as investors expect a full rebound. 

How Covid-19 impacted the card networks

The news of the first Covid-19 vaccine’s effectiveness in clinical trials prompted significant stock market moves in November, and in the cross-border payments space, it was the travel companies that saw the biggest climbs. And no wonder: the end of the pandemic will herald a jump in travel unmatched by any previous event.

Exactly when and how this will occur remains uncertain, and it is more likely to be in the second half of 2021 in time for northern hemisphere summer holidays. But when travel does resume, it will provide a powerful cash injection to the cross-border payments sector.