The Buy Now, Pay Later Movement Taking Off In Travel

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Buy now, pay later (BNPL), which for the last several years suddenly seemed to be everywhere, has been conspicuously slow in coming to the travel vertical. The explanation for why, Flywire Travel Segment Head Colin Smyth told PYMNTS’ Karen Webster earlier this year, is simple enough — travel players didn’t really feel it was something they had to offer. Business was booming, profits were record breaking and BNPL was nice to consider but not so much a need to have for travel operators doing just great without it.

Then 2020 happened, the industry crashed and burned and the great recovery has left a lot of players battered, bruised and feeling a whole lot more open-minded about the future of BNPL in the travel vertical.

“Some of the companies that we work with, I think they’ll be very open to it to get more cash flow in, to get paid faster,” Smyth said. “And I don’t think you’ll get as much pushback as there has been. If it can help the supply chain get paid faster, therefore be in business longer, it sounds interesting to us and is something that our clients would be more interested in today than they probably would’ve been 18 months ago.”

That interest has been visible in the segment, particularly as early 2021 has rolled along and the vertical as a whole has struggled to get back up on its feet as vaccines roll out and consumers consider leaving the security of their couches for parts unknown.

Travel-centric BNPL Uplift got travel push started early in 2021, reporting an uptick in demand for flexible payment options when making new vacation reservations.

“Buy now, pay later is not a new concept and has already proven its value internationally. It will be the economic kickstarter needed to ignite the travel industry,” Uplift CEO Brian Barth said in a statement. “There’s a certain amount of pleasure derived after you book a trip and anticipate all these new life experiences. This anticipation is driving travel bookings now for future vacations to give people something to look forward to.”

And travel players are hoping to catch hold of that newly emerging enthusiasm. Uplift notably saw 72 percent growth in Q4 of 2020 and signed on a host of new travel brands to its BNPL platform solution including Aeromexico, Air Canada, Alaska Airlines, MSC Cruises and Virgin Voyages.

Southwest Airlines, in fact, made headlines last month by becoming the 16th airline to join up with the Uplift platform.

“Uplift is seeing strong pent-up consumer demand for travel as COVID-19 case counts decline and vaccinations ramp up,” the BNPL service said in a news release in April. “Using Uplift as a buy now, pay later (BNPL) payment option gives Southwest® customers the freedom to book trips when they are ready, and spread the cost over a series of affordable monthly payments.”

And Uplift, the BNPL firm most closely associated with the travel vertical, is not the only BNPL player in the game viewing a post-pandemic bump as the industry strategizes how to bring their once avid now erstwhile customer base back.

Increased Spending

During a post-earnings release call with analysts, Affirm CEO Max Levchin said the company has begun  to see a “sharp uptick” in spending across categories that were pressured by the pandemic. For the travel space, gross merchandise volume (GMV) nearly tripled from second-quarter levels “and grew more than 50 percent versus Q2 of last year,” which itself was  a pre-pandemic quarterly high mark in the segment. In the latest quarter, the segment accounted for 9 percent of GMV.

During the Q&A with reporters, Levchin noted that “travel ticketing is seeing what would be described as a resurgence,” and said that momentum should continue through partnerships with firms like Vrbo and American Airlines, among others, going forward.

“The overall organic recovery is huge in the travel ticketing space, and we’re well positioned to benefit,” he told investors.

The year 2020 was a big one for the BNPL segment — spending via payment programs from Affirm, Afterpay, Uplift, Klarna and others grew 166 percent  over the same period in 2020, and year-to-date growth is tracking at the same rate, according USA Today. The percentage of online transactions using buy now, pay later plans in North America is projected to grow from 0.9 percent last year, to more than 3 percent by 2023, and travel is, pardon the pun, increasingly seen as the last frontier for BNPL to conquer.

So far, Expedia, Priceline, Hotels.com and several airlines like the aforementioned already offer the option. So do several airlines’ independently operated vacation package arms as cruise operators like Norwegian, Royal Caribbean and Carnival. Vacation rental company Vrbo, which (owned by Expedia), also just added a buy now, pay later option via Affirm, following Airbnb which added BNPL QuadPay about half a year earlier.

“This benefit enables families to plan and book future vacations now and pay for them later,” Mike Sutter, Vrbo vice president of product management, said in a statement when the new payment option was announced.

And travel players, after the bad run suffered in 2020 — and the still highly uncertain future of when and if B2B travel recovery will ever happen — very much need those families to book those vacations, en masse, as soon as their vaccinations are done. Families, couples, single people, church groups, sports teams — the travel industry very much wants to bring all of those people back, as fast as humanly possible given the staggering losses it is hoping to recovery from, and BNPL shows promise in helping to speed that recovery process.

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