What risks and opportunities does cryptocurrency carry for settlements between market participants.
The explosive growth of the bitcoin rate, which in February exceeded 50 thousand dollars, became the reason for a lively discussion in the professional travel media. In particular, the Phocuswire portal asked not an idle question whether cryptocurrencies could become a means of settlement for cross-border payments between buyers and service providers. We publish the translation of the most interesting theses in the material.
Since bitcoin first appeared in 2009 as the original decentralized digital currency, i.e. not controlled by banks or the government, several travel companies have already accepted it as a form of payment.
One of the first was the online travel agency CheapAir, which switched to payments in cryptocurrency back in 2013. Initially, the company used a third-party processor to convert bitcoin into dollars, which could then be paid to airlines and hotels, since almost all suppliers still require payment in fiat, that is, the “classic” currency.
Over time, CheapAir has created its own bitcoin processing technology. However, the co-founder and CEO of the company, Jeff Klee , argues that the need to exchange cryptocurrency for money is one of the obstacles to its widespread adoption in the travel industry.
“It would be much easier for everyone if the providers accepted cryptocurrency. Now we have to exchange for dollars and pay the supplier separately, he says. “This makes bitcoin and other ‘coins’ unattractive to many travel intermediaries. It requires extensive infrastructure, training, so that your employees can explain everything to calling customers.”
The company has invested heavily in infrastructure and staff training, but even now, cryptocurrency transactions represent only a “single digit” percentage of CheapAir’s sales. However, there are undeniable advantages.
“Customers who pay in bitcoin tend to be very loyal and tend to buy more expensive products … first class tickets and luxury hotel stays,” says Jeff Klee.
Another example is the Spanish company OTA Destinia, which has been accepting Bitcoin since 2014. Chief Executive Ricardo Fernandez says that while it only accounts for about 2% of the platform’s sales, the Bitcoin payment offering has attracted niche customers from around the world.
“Before 2020, the relationship between the price of bitcoins and the number of bookings was direct – the higher the price, the more bookings. In 2020, when bitcoin flew up, the approach of customers has changed. Now if the price rises, the number of bookings decreases, because people are now looking at cryptocurrency as an investment, ”says Fernandez.
The Australian online travel agency Travala, founded in 2017, works not only with bitcoin but also with 25 other “coins”, including its own called AVA.
The co-founder and CEO of the company, Juan Otero, claims that the monthly turnover reaches several million dollars, and about 70% of this amount is in cryptocurrency. According to him, further growth of payments in the “crypt” is inevitable.
“We are just at the beginning of what will be a real financial revolution when people move from fiat money to cryptocurrencies,” he says. – When you pay with cryptocurrency, it’s almost instant, almost free and private. Plus there are no additional credit card fees or waiting times to process or reject a payment. When paying with cryptocurrencies, all the hassles and costs associated with traditional credit card payments are eliminated.”
However, the full transition to “crypto” has its drawbacks. Thomas Helldorf, vice president of airlines and travel at Worldpay, says the main risk is exchange rate fluctuations.
“If you accept bitcoin, you also have to accept the risk that by the time of conversion, its value can both skyrocket and collapse, and this makes the margin of the business unpredictable,” says Helldorf.
A real alternative, in his opinion, could be a digital currency issued by governments or central banks. This would facilitate faster payment processing and also ensure the stability of fiat support. Currently, the possibility of issuing a digital currency is being studied by the central banks of countries such as China, Singapore, Sweden and even Russia.
“Government backed digital currencies are simply a digital representation of the currency they represent. Their value does not change. And it is a certified digital payment instrument that cannot be counterfeited. It’s the next evolutionary step,” says Halford.
Airlines and other travel service providers should start preparing for the transition to digital currencies now, he said. In particular, develop standards and systems for connecting a digital payment type to a trip record.
“We all know that it takes years for these specifications to be approved by IATA and other market participants, so I think now is the right time to think about new large scale payment options, get ready and maybe be the first industry to will be able to accept such cross-border payments,” says Helldorf.
Such automation, in his opinion, will stimulate the widespread introduction of smart contracts and distributed registry technology in the tourism industry.
By linking central bank digital currencies to a smart contract—the mechanism that governs blockchain-based cryptocurrencies—the payment process between travelers, intermediaries, and suppliers will be faster and more seamless.
“The smart contract has certain rules for what happens in what situation, so there is no need for clearing and settlement. No invoices, bank transfers or checks. The booking, the order itself, contains the financial value and all the necessary information, and this allows you to move money between the participants in the transaction as the services are provided.
Crypto Travel 