Right now we are at the beginning of an important transformation phase in online payments, and at Availpro our goal is to help hotels foresee new trends and get ready benefit from them. That’s why we are releasing a series of blog posts about the future of payment in the hotel industry. For the 3rd week of discussing this topic, our CTO Antoine Buhl dives into the mobile dimension of payment.
#3 – Make the most of mobile payments
At Availpro, when we look at the behind-the-scenes data, we see the general booking process is being driven by smartphones and tablets. The OTAs also know this – but it’s something they don’t really share with you. More than half of visits to Booking.com or Expedia, and also in reality your hotel websites, are arriving this way.
When we look at our statistics more closely, including conversion rates, we discover that while half of these visitors see the offers from a mobile or a tablet, hoteliers tend not to find half of their reservations at this end of the chain. The question is “why?” Why is the conversion rate lower on mobile than that of desktop computers?
One reason is the overall user experience – for example, when researching rooms and amenities, the user experience is not at the level that customers would expect. And if you have not already done so, look at how your hotel behaves on mobile, and compare that to the kind of experience the user can have on the OTAs’ apps.
But as well as user experience, mobile payment methods play a key role in a healthy conversion rates.
Mobile payments today
In today’s world, we are used to purchasing goods online for which we pay right away. Even when you buy a pair of shoes on the web, you pay – and then you receive the goods. We don’t see anything wrong with that.
So where are we right now? It’s simple: you take your phone in one hand, you make your reservation, you arrive at the payment section, take your credit card in the other hand, and with your third hand, type the code of your credit card. If you don’t have a third hand, it becomes a bit more complicated…
The reality is that current payment methods are not efficient in the mobile environment. So companies like Google, Apple and others are investing heavily in solutions like Google Pay and Apple Pay, which allow you to make a payment with one click, and make this particularly painful payment step a lot easier in the mobile space.
But returning to the present, how exactly does a credit card work today? And what mechanisms are available to transfer the payment from bank to a bank? With online payments, there are roughly two modes of operation: “gateway” and “collecting”.
For the gateway model, there is the side on your hotel, and the side of your customer, and in between a booking engine that allows the customer to book a room in your hotel. The customer is connected to your bank, and then your bank triggers the card payment by exchanging, on the card network, with your customer’s bank. It’s a simple mechanism.
But what stands out with this mechanism is the cost structure. You have the cost of the gateway, but also the cost of your bank. So when you look at other payment platforms, take into account the different costs that pile up just to calculate the price of the transaction.
During the collecting method, there’s a similar scenario. You have your hotel on one side and your customer on the other, connected by a booking engine. But in this instance, you’ll work with a payment platform collecting the money. The collector has its own bank, and it is this bank that will trigger the payment on the card network with your customer’s bank. Then, this collector will transfer funds into your bank.
The result is that the cost is more readable: you have a unique payment, and a single transaction cost that may be a percentage plus a fixed fee.
When you choose your technology partner, look at the booking engine, but also at how it it performs when customers book on your site from their smartphone.
Analyse the transaction costs, look at the models and look at how they could affect your bank, and find out what your bank will charge you. Some gateway solutions might initially say there are no charges, but the bank fees may prove be relatively high afterwards.
Also look at the different types of payment that can be accepted. For now, credit cards seem to be the most common payment method, used by more than 90% of customers. However in the Netherlands, more than half of the customers who buy online do not pay by credit card. This region prefers a specific local solution called “iDEAL”, and is used by more than 50% of online payments in the Netherlands.
So if you’re interested in Dutch customers, do not target them unless you offer this form of payment. The same situation applies to countries such as Germany, which has solutions like SOFORT; in Asia, there exist many innovative payment methods, and especially mobile, which are developing rapidly. In Romania, and other counties, sometimes buying vouchers in a physical shop to use online later are the preferred method.
Weigh up the different payment methods on offer, and align them to the regions of customer you’re targeting.
For more info about automated payment solutions, you can check our PSP Connect infographics or read the full series of articles: