A few years ago, I sat in a meeting with an airline executive who was, surprisingly, not talking about planes, fuel, or even ticket sales. Instead, he was talking about payment processing fees—those small but persistent charges that can quietly add up to big costs.
He explained that every time someone booked a ticket with a credit card, the airline was paying anywhere from 2% to nearly 4% of that sale just to process the payment. And the kicker?
The cost of payments is now one of the most significant challenges for travel businesses across the globe.And while credit card fees have always been a part of the equation, their increasing impact on profitability is forcing companies to explore new solutions.
In my opinion there are five main ways payment costs are impacting the travel industry and it turns out this isn’t just a problem for airlines!
Across the entire travel industry, hotels, travel agencies, tour companies, everyone is feeling the pinch of payment fees.
But why is this such a big deal? And, more importantly, what can the industry do about it?
Let’s look at the five key ways payment costs are affecting the travel industry, why this is happening, and what the future might hold.
1. Hidden Cost of Airline Payments in Travel, A Growing Problem
There was a time when booking travel meant paying with cash or checks, and eventually, credit cards came along and revolutionized the process.
Suddenly, customers didn’t need to carry around piles of cash, they could book flights and hotels with just a card.
But with this convenience came a hidden cost.
Fast forward to today, and those credit card fees have only become more of a burden.
According to a 2024 report by Phocuswright, travel businesses worldwide pay between 2% to nearly 4% in processing fees on every transaction.
In North America alone, nearly 40% of travel businesses report paying between 3% and 3.9% per transaction. And Europe? Not far behind, with 32% of businesses in the same boat.
Adding to the complexity, recent developments in Australia highlight how regulations can amplify these challenges. Major airlines like Qantas and Virgin Australia warned that banning card surcharges, as proposed by the Federal Government, could lead to higher ticket prices. Without the ability to pass processing fees onto consumers, these costs would likely be absorbed into fares, potentially impacting demand and competitiveness.
This dynamic underscores how payment costs aren’t just a hidden issue—they’re becoming a focal point in the industry’s battle to balance profitability with customer expectations.
2. Different Places, Different Problems
Payment challenges vary significantly across regions. In Asia-Pacific (APAC), 75% of travel businesses report struggling with high credit card fees, while 62% of businesses in the Middle East and Africa (MEA) face similar challenges.
However, market dynamics can shift the impact. In Africa, for instance, low credit card penetration (1.4% in Ghana and 9.6% in South Africa) reduces reliance on these fees.
Meanwhile, Australia’s approach to card surcharges exemplifies how regulations shape regional outcomes.
While passing credit card fees to consumers has been a common practice, the potential ban on surcharges could create ripple effects.
Qantas and Virgin Australia argue that these surcharges allow them to maintain lower base fares.
Eliminating them might push airlines to raise ticket prices across the board, impacting consumer affordability and demand.
This scenario highlights how local rules and customer behaviors play a critical role in how payment costs are managed—or exacerbated—across the globe.
3. Stuck with Old Payment Systems
As I engaged in deeper conversations with travel industry leaders, another big issue came up—many companies are stuck with outdated payment systems that just can’t keep up with today’s digital world.
Travel businesses, especially the big players like airlines and hotel chains, often rely on old systems that are hard to upgrade. These systems weren’t designed for modern digital payments, making it tough to adopt new, cheaper options.
High Costs of Switching: Even though newer payment methods could save money, upgrading these systems is expensive. For many businesses, it feels easier (and cheaper) to just stick with what they have—even if that means paying high fees.
This is one of the biggest barriers standing in the way of reducing payment costs.
Technology exists to make things cheaper and more efficient, but the cost and complexity of upgrading are keeping many companies stuck in the past.
4. The Rise of Alternative Payment Methods: Transforming the Travel Industry
As transaction fees continue to burden businesses worldwide, Alternative Payment Methods (APMs) emerge as a cost-effective solution in many regions. In countries like Brazil, India, and China, digital wallets and real-time bank transfers have become popular, offering lower processing fees compared to traditional credit cards.
Lower Fees, Better Options
In APAC and LATAM, platforms like Alipay and WeChat Pay are revolutionizing payments with far lower transaction costs than credit cards. These APMs are quickly becoming the preferred payment method for consumers due to their convenience and affordability.
Adoption in Emerging Markets
Mobile banking apps and instant payments are gaining momentum in regions like LATAM, providing businesses with a competitive edge through reduced fees and faster transactions. However, adoption in North America and Europe remains slower, as consumers in these regions still rely heavily on credit cards, making it challenging for businesses to shift payment preferences.
Fintech Platforms Driving Change
The evolution of digital payment platforms such as Afterpay, Venmo, Wise, and Revolut is reshaping the travel and aviation industry.
These platforms offer alternative payment solutions that improve customer experience and streamline financial operations.
Impact on the Travel Industry
Increased Accessibility:
BNPL services like Afterpay make travel more affordable by allowing payments over time, appealing to budget-conscious travelers and boosting booking rates.
Enhanced Customer Experience:
Digital wallets and multi-currency accounts simplify transactions, offering cost savings and boosting customer satisfaction and loyalty.
Streamlined Operations:
Partnerships between fintech companies and travel service providers reduce transaction fees, simplify payment processes, and enhance operational efficiency.
The Proof is in the Pudding - Fintech Platform Growth in 2023
Venmo: Processed $276 billion in total payment volume, reflecting a 13.1% increase from the previous year.
Wise: Handled £105 billion in transactions in FY2023, a 37% increase compared to FY2022.
And Revolut generated £1.8 billion in revenue in 2023, a 94% year-on-year growth, driven by its expanding global user base.
As fintech innovations continue to evolve, the travel and aviation industry is set to experience even greater financial flexibility, efficiency, and enhanced customer satisfaction.
5. Different Rules, Different Costs
Another factor that complicates things is government regulation.
In some places, laws help keep fees in check, while in others, businesses are left to handle the costs themselves.
Australia’s Approach: their regulations require that credit card fees be passed on to the customer, which helps businesses keep costs down. But that comes with its own challenges, as customers aren’t always thrilled about paying extra fees.
Compliance Headaches: For businesses that operate globally, managing these different regulations can be a nightmare.
What works in one country might be illegal in another and figuring out how to stay compliant while keeping costs low adds a whole new layer of complexity.
For global companies, this juggling act between compliance and cost management is one of the biggest challenges they face.
Alternative Payment might be the New Normal
The travel industry is no stranger to challenges, but payment costs have emerged as a particularly stubborn hurdle.
Airlines, hotels, and travel agencies are navigating a complex web of outdated systems, rising fees, and evolving regulations like those in Australia.
Yet, there’s a silver lining. Alternative Payment Methods (APMs) are gaining traction, especially in regions like APAC and LATAM. Digital wallets and real-time bank transfers offer businesses a way to reduce fees while improving the customer experience. However, adoption remains slower in North America and Europe, where consumers are more reliant on credit cards.
For travel companies operating globally, adaptability is the key to survival. The Australian debate on surcharges serves as a reminder of how rapidly the landscape can change. Businesses that can pivot quickly—by upgrading payment systems, exploring alternative methods, and navigating regulatory shifts—stand the best chance of thriving.
About the Writer:James is the co-founder of Anjuna Airline Solutions and has been a key player in the aviation industry for over 20 years. With deep expertise in airline operations and technology, he has helped drive innovation and efficiency across the sector. To learn more about Anjuna Airline Solutions, visit here.
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