How to Integrate Open Banking Payments into Travel Business: Guide for Merchants

The travel industry is fiercely competitive. Success requires travel businesses to offer a strong digital presence. The Hilton’s Trends Global Survey reveals that 80% of global travellers consider full online booking essential, particularly among 86% of Millennials and 83% of Gen Zers. As a result, internationally focused agencies must offer quick and easy online payments that support multiple currencies and payment methods.

Meanwhile, numerous travel merchants face challenges with payments. High card fees, slow settlements, delayed refunds, and inefficient travel payment gateways, just to name a few. Open banking can address these problems.

Here, we look at how to integrate an open banking payment gateway for travel agencies, including the key benefits and factors to consider.

What Are Open Banking Payments?

Since 2018, the EU's PSD2 regulation has mandated that banks share customer data with authorised fintech firms through application programming interfaces (APIs). This secure method of data sharing has promoted direct account-to-account (A2A) payments, which in open banking platforms are referred to as ‘Pay-by-Bank’.

The A2A payment method offers numerous benefits, such as fast transfers and a pleasant user experience. With pay-by-bank, customers bypass the need to manually enter their payment details as the system redirects them from the payment page to their trusted bank’s interface.

This improvement in the shopping experience reduces cart abandonment and enables merchants to access funds more quickly. According to Statista, in 2022, A2A payments made up 9% of global online transactions.

How Pay-by-Bank Works

The process for open banking A2A payments typically follows these steps:

• The user initiates the payment and selects the ‘Pay-by-Bank’ option.
• The user picks their bank and logs in through the bank's verification system.
• The user reviews the pre-filled information and authorises the payment.
• The funds are then debited from the user’s bank account and credited to the merchant’s account.

Benefits of Open Banking Integration

Pay-by-bank offers cost savings, speed, and convenience for customers and merchants. All of these are significant benefits of open banking integration for travel providers.

Cutting Costs

Open banking payments charge lower fees. This is a great selling point, especially as the travel industry recovers from the pandemic and the cost of living crisis. Traditional methods like card payments no longer offer significant savings. Pay-by-bank avoid card networks by transferring money directly between bank accounts.

Instant Settlement

Slow settlements are a common challenge for travel merchants. Traditional payment methods like cards and BACS can take up to three days to clear, which can disrupt the cash flow and travel bookings. Additionally, travel merchants often face extended settlement periods because card processors retain larger rolling reserves.

In contrast, A2A payments are credited to merchants' accounts almost immediately. This enables travel businesses to monitor their cash flow accurately in real time and enhance reconciliation processes.

Higher Conversions

In today's fast-paced world, speed is essential. Customers expect immediate results, and any delay or issue can push them towards the competitor. According to the Hilton survey mentioned above, 76% of global travellers prefer apps that minimise friction and stress, and this expectation extends to the checkout process.

Open banking removes the need to enter card details manually. Secure payments are made through the users’ banking interface with bookings in just a few clicks. This helps reduce cart abandonment.

How to Integrate Open Banking Payments into Travel Business

There are several ways to implement open banking payments integration into a travel business. Let’s examine them closely.  

Integration with an Open Banking Provider

The easiest way to integrate open banking services for travel firms is via partnering with a provider like Noda. Their products may already be compatible with your existing payment methods. Various types of pay-by-bank integrations are available:

• Direct Open Banking API Integration: This option offers a customisable payment journey but may require more time and technical expertise for implementation.
• Hosted Payment Pages (HPPs) and Software Development Kits (SDKs): Provide a smoother and easier integration experience for developers, with slightly less customisation available.

The type of integration you choose will depend on the desired payment flow for your travel website and the resources you have available. Although integrating may seem daunting, a reliable provider can guide you through the process and recommend an integration type.

Typically, a provider will assign an integration specialist to help with your setup. An experienced provider would have completed hundreds of integrations and gained insight into what’s working for different business types. Make sure to discuss the following questions with them:

• Integration Template & Timeline: A trustworthy provider will assist you through the integration process and help you create and adhere to an implementation timeline.
• Objectives: A primary objective for any new payment process is to enhance conversion rates — the percentage of customers who complete the payment journey they start. Your integration team should offer advice on designing a payment flow that optimises conversions.
• UX/UI Recommendations: Based on their past experience, your provider should offer UX and UI recommendations specifically tailored to your use case and objectives.

The integration process demands input from both the payment provider and your business. Any delays from your side, like limited developer resources or shifting priorities, can prolong the timeline.

Integrating Yourself

Self-serve options also exist, allowing businesses access to raw open banking data. However, for many travel companies, using this data effectively and integrating it into existing systems without expert guidance can be a complex and challenging task.

For example, issues can occur when banks use non-standard APIs. Working with a payment provider will address this challenge.

Future of Open Banking Payments

The widespread adoption of open banking payments is gaining momentum. And this trend will continue. According to Statista, A2A payments will make up for 10% of total online transactions by 2026. Currently, they rank as the fourth most popular payment method worldwide, following digital wallets, credit cards, and debit cards.

At present, Europe spearheads the adoption of A2A payments, as per Statista's March 2023 report. However, open banking geography might broaden in the coming years. McKinsey forecasts that in North America alone, A2A payments could manage around $200bn in consumer-to-business transactions by 2026.

Open Banking Payments with Noda

​​Noda is a global open banking provider and a travel payment solution that assists online merchants with end-user KYC, payment processing, LTV forecasting and UX optimisation.

We partner with 2,000 banks across 28 countries, spanning over 30,000 bank branches. Noda supports a wide range of currencies for globally-minded clients. We offer scalable plans to fuel your business growth and e-commerce plugins for easy integration.

With Noda's advanced Open Banking API, online businesses can easily integrate A2A payments, offering their customers a seamless and secure payment experience with lower fees. Whether you're looking to enhance customer verification processes, optimise payment systems, forecast long-term value, or refine the user experience, Noda is your partner in growth.