The march of traditional banks and newer fintech companies into the travel space is ongoing, gathering pace even, with numerous partnerships and launches making headlines in recent months.
Whether they believe they can remove friction and/or offer something better than existing travel companies, payment specialists and financial institutions are looking to increase their stake in the industry.
Just last week, for example, Revolut announced free payment cards from vending machines at European airports including Rome Ciampino, Milan Malpensa, Portugal's Porto, Helsinki and Brussels airports this summer.
The company, which first introduced a vending machine at Rome Fiumicino in July last year, said the move is the latest step in its strategy to be "a primary account and accompany customers everywhere."
Meanwhile, Japanese credit card issuer SMCC is the latest to partner with Hopper Technology Solutions (HTS) to create a travel loyalty portal launching next year. HTS' deal announced last year to power the NuViagens travel platform for Nubank Violeta, the bank's product for high-income customers, also went live recently.
Subscribe to our newsletter below
Earlier this year, payment specialist Klarna expanded its existing partnership with Expedia in Europe to provide customers with flexible payment options to the United States as well. The deal came on top of Klarna's announcement of a similar tie-up with Cathay Pacific in late 2023 for customers in some European countries.
Klarna data comparing the volume of flights/holidays/hotels sold using a Klarna payment method for the year from April 2022 to March 2023 to the same period from 2023 to 2024 revealed a doubling of sales by airlines and a six-fold increase of travel agencies using its payment methods.
Market opportunity
Raji Behal, head of western and southern Europe as well as the United Kingdom and Ireland for Klarna, said, "We think the opportunity is huge. If we look at just flights alone, it's over a $1 trillion sector and 70% of that is currently paid using a credit card. So we think if buy now, pay later converts, even just a small percentage of that $700 billion market, it could represent a huge opportunity. That's just flights. If you add in hotels, mobility and all of the other associated payments, it's just a massive market."
Behal added that the consumer appetite for these more flexible payment options is significant, driven by "historically high" interest rates and the desire for payment alternatives for larger purchases that don't incur huge interest.
"One way that we look at demand is through the use of our products, like the Klarna card and our one-time card via our app, which you can use on non-integrated websites. And the growth that we're seeing in demand here is pretty evenly balanced between both budget and traditional airlines, with the strongest demand coming from the demographics of 26- to 35-year-olds, particularly in Germany and U.K. So that really gives us a true sense of the organic demand."
And while a number of pure play travel buy now, pay later (BNPL) companies have sprung up, Klarna believes its scale and wider focus is what will make it succeed. Behal said that pure play travel BNPL could be "quite narrowing."
"When I look at travel, companies are looking for an international proposition. And you need to be a little bit patient in the travel business, because the sales cycles are longer and tech integrations are much more complex," she added.
"It's really hard to build the relationship with a consumer when you only offer buy now, pay-later on travel. Our consumers are making two to three purchases on a variety of things per month. Pure play travel buy now, pay laters have been trying to build kind of both sides of the equation at the same time. Klarna already has the scale of a highly engaged audience for globally 150 million consumers."
While Klarna purchased travel planning site Inspirock in late 2021, Behal said the integration is "on pause" while it focuses on other priorities such as its partnerships with travel companies.
"Equally, over the past 12 months we've seen massive growth in generative [artificial intelligence] and we believe that this will also ultimately take on probably a large amount of the inspiration and planning part of the travel journey."
Driving experiences
Klarna is just one of a number of companies looking to boost their presence in travel by powering parts of the travel booking journey or offering travel inventory to high income customers. JP Morgan Chase has made a number of acquisitions in the space including Frosch, Valerie Wilson Travel and cxLoyalty.
The company has made no secret of its plan to target “affluent” consumers through its lifestyle products as one of three key areas of growth for the business, where it sees a “unique competitive advantage and outsized opportunity for growth.”
In a shareholder update in April it revealed it had achieved $10 billion in booked travel volume in 2023, up 25% from 2022. At the time, Marianne Lake, CEO, Consumer & Community Banking, also shared that the company had just relaunched ChaseTravel.com.
The month before Chase Travel had released its first national marketing campaign "Where Travelers Go," providing some further clues to its thinking about the travel space. Chase Travel chief marketing officer Wendy Vividor said the campaign was designed to talk to and inspire current members to travel while ensuring it is providing them with the right tools to discover and book content from partners.
One trend it has noticed with card members, which is helping to inform its strategy, is the desire for unique experiences such as the recent solar eclipse, according to Vividor. She added that travel is part of its card members' DNA, sharing that "1-in-4 travel dollars" is spent by Chase card members so "travel is and will continue to be core to our card members' lifestyle and central to our brand."
She also said that the company's strength lies in its ability to combine its travelers with its first-party data, commerce platform, travel partners and the acquisitions it has made.
"We're really bridging together meeting our customers in terms of self-service through the cxLoyalty acquisition and our high touch personalization, with our acquisition of Frosch and Valerie Wilson Travel. So as we look at our customers and where they sit, the equation of travel being part of their DNA, the spend with us and then unmatched brands that we're bringing together in terms of experiences, benefits and then also personalization, we feel like we have the right ingredients to really bridge that, meet our customers where they are and talk to them like travelers."
Vividor is not surprised that travel has caught the attention of financial institutions given the significant travel spend through its own payment cards and the desire to build deeper relationships with customers, keeping them within its ecosystem.
"If we move to meet our customers' needs further up the funnel we really can make these card member benefits come to life a bit more and move to more of a relationship basis and deepening with our customers versus transactional. That's where there's a ton of opportunity to really win not just share of wallet but really the hearts of customers and create that long-term engagement. That's where we're focused in terms of where we can differentiate and why this was an interesting value proposition for us in terms of investment to continue to grow."
Capital One is another company in the space that has signaled its ambitions through the acquisition of and investment in several travel companies. In September 2021, Capital One unveiled its revamped Capital One Travel portal powered by Hopper. A month later, it announced its acquisition of the team and assets of travel management platform Lola. Earlier the same year it led Hopper's Series F round of $170 million and in late 2022, it invested a further $96 million in Hopper and extended its partnership with the company.
A better path
Last year Capital One acquired digital concierge Velocity Black and its venture arm invested $25 million in Inspirato. Jenn Scheurich, managing vice president and head of Capital One Travel, Lounge & Retail Experience, explained that its investments and acquisitions are part of a strategy to create a better travel experience.
She said it has chosen to work with Hopper to develop Capital One Travel because it wanted to build an experience that "stood out not just relative to offerings from other financial services companies, but relative to any platform on the market — period."
"In looking for a partner to help us build the platform, we knew we needed a like-minded tech company who was data-driven, design-forward and customer centric in their approach," she added.
The company is adamant that it can find "a better path forward" in terms of the travel experience, and its goal is to solve traveler pain points such as fluctuating prices and fragmented content and "offer access to curated, premium experiences."
That drive for experiences over things seems to be a legacy from the pandemic years. Little wonder then that banks and other companies, gleaning insights from their volumes of transactional data, are seeking a greater presence in the travel space by offering premium products and experiences. If further proof was needed, psychology studies have shown that humans get more satisfaction from "experiential purchases" such as travel and entertainment. In addition, numerous studies reveal consumers prioritizing spending on experiences and seeking out seeking moments of joy so it's not a trend that will go away any time soon.