BNPL Travel: On credit, in style

It’s not an enigma how the travel industry was one of the most impacted during Covid. The pandemic changed the way people travel in India. Revenge tourism has outperformed itself.

Recovery doesn’t seem elusive as Indian tourists learn to live with the virus. The country has retained its top position in South Asia on the Global Travel Development Index, which looks biennially into travel and tourism patterns. Post pandemic, there is an emerging trend characterised by a surge in all-inclusive packages and an uptick in international tourism. Travellers are willing to spend the extra buck on hygiene and safety, whether the beaches, hills, or city breaks.

The travel purchase pattern has increasingly shifted to a “save and spend mode”. People want to spend on travel, but instead of parting with money in one go, they prefer to make a staggered payment. Hence, there has been a significant uptick in travel riding on the Buy-Now-Pay-Later (BNPL) services. With BNPL providing easy access to travel, it has been a transformative, but fragmented landscape for travel merchants.

BNPL fills a significant lacuna in the travel market, and consumers welcome the convenience, flexibility, and charm of interest-free credit. However, their rapid growth, with no regulatory framework, has led to a lack of market uniformity. The differences in product offerings, terms of use and the many providers and business models can confuse consumers. As with other forms of credit, consumers face risks, and the BNPL industry must manage these appropriately. There are also questions of responsible lending, and the debt bubble rising with the unregulated services of such BNPL promises.

For travel merchants, BNPL reduces the chances of package abandonment, increases sales, and adds stickiness without any risk. This is because BNPL providers pay merchants up-front and issue loans to consumers while bearing all the credit risks and administration costs of running the loan programme. Support is needed for the increasing demand for BNPL in consumer and merchant-friendly ways. The answer is simple — to optimise and innovate.

An integration hub for BNPL solution providers across the country would give merchants a single API to integrate with the ever-growing suite of solutions. It would offer complete coverage with best-in-class BNPL providers offering split payments in travel, tourism, airline, and hospitality industries, enabling customers to get the best possible BNPL offering, future-proofing against technical and regulatory requirements.

Akash Dahiya and Abhilasha Negi are Co-Founders of SanKash, a travel fintech brand.

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Published on July 10, 2022