Andrew Smith: Agoda’s payment innovations open trillion-dollar opportunity

Te digital payments revolution in travel: Journeying to the future

Despite costs of living continuing to rise, summer is just around the corner and people are counting down the days to their next vacation. However, paradise can be tarnished by the threat of fraudulent activity, adding unwelcome stress to holiday plans.

Online travel agencies such as Agoda play a crucial role in making sure tourists don’t have to deal with added stress on holiday, through providing the ‘middle-man’ service that alleviates industry challenges and creates seamless, secure payments for businesses.

In an exclusive interview, Andrew Smith, Senior Vice President of Supply at Agoda, spoke to Payment Expert to shed light on how his firm is navigating the complex landscape of travel payments, from addressing fraud risks to streamlining payment processes.

Andrew Smith – Source: Agoda

Payment Expert: How is Agoda addressing the challenges of complexity in travel payments, such as managing fraud risks and working with a diverse range of B2B payment providers?

Andrew Smith: Emerging digital innovations in the FinTech space play a huge role in alleviating current industry challenges to enable better access to financial service solutions for both our travel suppliers and consumers. 

Machine Learning is a great example of such an innovation. Leveraging this technology and using route data allows travel suppliers to identify high-risk transactions more easily, improving fraud detection and prevention measures. Coupled with our team that continues to oversee some of the fraud cases, this has made for a highly effective combined anti-fraud approach for us so far. 

We also currently offer 111 non-credit card payments. To effectively manage the complexity associated with having so many payment methods, consistent technological innovation and adaptation is critical. You need to be able to upgrade to a new API to incorporate their new products, you need to be able to route them effectively to merchants, and so on. Our tech teams are constantly at work to navigate these challenges.

PE: What role has Agoda’s payments strategy played in securing its success rate as a global OTA and partner to the hotel sector?

AS: Our goal is to support our partners to grow their businesses with us, and together enable travellers to pay the way they want, when they want. When working together with partners, our focus is on providing increased revenue security, winning more customers and helping to better manage the complexities of payments by streamlining operations and reducing transaction costs. 

This is particularly important for many of our smaller partners like SMEs, which have limited on-site access to robust payment technology and infrastructure as compared to larger travel suppliers. We can provide the economies of scale that many of these smaller partners don’t have when it comes to payments innovation. 

In my observations, there have been fewer digital fintech innovations serving Southeast Asia’s SMEs, leading to an untapped trillion-dollar opportunity for the region’s underbanked population. Part of the answer to this lies in embedded finance – through offerings like prepayment programs on our platform, we can provide our smaller partners with access to a wider range of relevant financial services that they otherwise may not be able to access, reducing payment-related friction and cost on their end. For example, we know that customers who choose to pay when they book are typically less likely to cancel – which can make a huge difference for our partners and their businesses.

In addition to decreasing operational workloads for our partners, we also help companies improve their cash flows by enabling practices such as more efficient and timely payouts to properties through our white label capabilities. Fraud protection is also a core focus area, with our Machine Learning fraud detection systems boosting security for our partners. 

PE: How has embedded finance enabled Agoda to provide a seamless payment journey that boosts customer engagement? Could you elaborate on why payments optimisation is central to Agoda’s vision of a connected trip experience?

AS: Our vision of providing a connected trip experience involves being the go-to touchpoint for every part of the customer journey, providing a seamless and hassle-free customer experience. Reducing payment friction is a huge aspect of this. Through our embedded finance options, we are evolving to deliver a seamless end-to-end payment process for travellers that addresses their key pain points and expectations, such as offering local payment preferences.

The consumer expectation around cross-border payments is growing, with more travellers expecting to be able to pay through their local payment methods even when they are overseas. This is an especially pertinent demand in Southeast Asia, which has an extremely diverse and fragmented digital payments landscape. Embedded finance allows us to incorporate options for them to pay via more local methods – diversifying options for not just consumers, but also simplifying the payment process for accommodation suppliers to allow them to better meet shifting consumer needs.

We are also working to expand the wallet functionality on our platform, as well as developing our capabilities for built-in insurance payment options, all of which feeds back into our connected trip vision by creating a one-stop platform for consumers to manage all components of their trips.

PE: What benefits do payment trends such as BNPL and tokenization offer travellers and how has embracing these trends benefited Agoda’s business?

AS: For many, travel can be a big purchase. Vacations are often something that consumers splurge on to treat themselves once or twice a year, and having the flexibility to pay for it in instalments through options like Buy Now Pay Later is becoming increasingly attractive – especially as we cope with rising costs of living. 

Payment-related fraud is also becoming an increasingly prominent issue within the travel industry, with more accommodation players citing this as a cause for concern. Trends like tokenization play a major role in alleviating this anxiety, offering elevated security for both partners and consumers. 

Tokenization’s biggest benefit comes from its ability to ensure that sensitive payment data is not exposed during online transactions, which effectively reduces the risk of breaches or fraud. By storing payment information in tokens that can be reused across multiple channels for future use, this trend also significantly streamlines the management of sensitive data. This not only improves efficiency and reduces operational costs for our businesses and partners, but also creates a more secure and seamless experience for consumers, who will no longer need to repeatedly provide payment data when making online payments for the different components of their trip.

PE: Agoda and Mastercard entered a partnership last year to digitise B2B travel payments, what impact have you seen this have on your business over the following months?

AS: While diversifying available payment options is a must in fragmented landscapes like Southeast Asia, businesses face restrictions in doing so. Again, this is particularly true for smaller businesses, which may not meet the minimum transaction criteria to support credit card payment channels. By partnering with major payment players like Mastercard, Agoda becomes the middleman who supports our partners to expand their payment offering. 

Our partnership with Mastercard allows us to make and receive B2B payments wherever Mastercard is accepted globally, which essentially overcomes limitations for our partners by unlocking their ability to accept credit card payments. This is especially helpful in markets like Vietnam and India, where the lower limit for transaction volumes is considerably high for a lot of hotels. Such partnerships can help smaller enterprises function as a high-level business, enabling them access to a wider customer base. 

PE: What trends do you anticipate shaping the payments landscape in the travel industry for 2024?

AS: 2024 is shaping up to be an exciting year for payments. We are likely to see increasing adoption of e-wallets and other innovative digital payment options across both suppliers and consumers, as demand for flexible options continues to grow. We are also seeing many benefits to cross-border QR code payments, which will continue rising in prominence, especially across Southeast Asia as more regional initiatives are put in place to support this payment method. 

More hotels are also adopting Virtual Credit Card payments with more flexible features and benefits that can expedite payment processing. For OTAs like Agoda, working with providers like ShopBack or Klarna can expand our access to new customer segments, which unlocks new avenues of growth for us by tapping on customer groups who might not know our brand. 

At Agoda, we are also bringing our partners more benefits through programs like the Advanced Guarantee Programme (AGP), which allows us to provide cash flow to partners once we have established our relationship with them. This in turn makes it easier for them to invest and get guaranteed business through channels like Agoda. 

In 2024, we anticipate that we will continue to innovate and find new ways to bring value for our partners and consumers through payments.