Deep dive into online travel payment issues in the Middle East

The Middle East might be attracting investments from a lot of hotel brands, but when it comes to online payments the scene is in its infancy and confusing.

Tnooz spoke to a number travel brands operating in the region to explore online payment penetration, challenges faced and emerging payment-related trends:

Payment infrastructure

Cleartrip, the India-based online travel agent also has presence in six countries in the Middle East. With respect to online payments, it wasn’t all smooth for the company when it started its Middle East operation.

When Cleartrip started its operation in 2011, the number of payment gateway operators were very limited. For example, only in 2012 Visa introduced Cybersource solution, and they are the second largest player, says Tarique Khatri, its senior vice president.

He adds:

“There are hardly any aggregators in the market. For an online travel service provider to have a composite payment offering, at least two or three integrations are necessary to provide all payment options available in the industry.

“First, its about accepting cards. Next, its about using cards. Even if somebody has card, the needed gateways should be available to accept them. This is a big hindrance for players to allow online transaction to take place.”

Debit and credit card penetration

There are various (and contrasting) viewpoints about the penetration of debit/credit cards in Middle East.

An official from Yamsafer, a Middle East-based online hotel booking service, says:

“Over the past two years we have been fully engaged with our customers where the issue of payment by a credit card online is viewed as problematic.

“Due to the low credit card penetration rate in the MENA region, our customers are unable to fully capitalize on Yamsafer’s lower hotel rates when it comes to booking hotels online.”

Khatri adds:

“Middle East is a large debit-card market, the number of debit cards outstrip the number of credit cards by at least a multiplier of 3x to 4x. Credit card penetration is comparatively low, Saudi Arabia penetration is at 6%, UAE is at 15%, other markets are in single digits. So, the average penetration is not more than 15%.”

There are a larger number of debit cards in circulation, however these are not optimized for online transactions yet.

Vikram Ahuja, co- founder of holiday packages booking service Triperna, has the same view as Yamsafer and Cleartrip:

Credit card penetration in MENA region is traditionally much lower compared to more mature markets globally.

“Traditionally, there is a trust barrier that needs to be overcome for local players with respect to online payments, especially with credit cards as a payment instrument. Up to to 70-80% of payments are still done via Cash On Delivery and other offline payment channels.

But, things are beginning to change in mature markets, Ahuja adds:

“Over the past couple of years though, we have noticed an increase in credit card usage in UAE due to an increased number of e-commerce players, more awareness and better payment gateways.”

However, Albert Dias, co-founder of Musafir, doesn’t agree. The Middle East-based OTA recently launched its India operation with $16 million investment.

He says:

“The MENA region is far too diverse to generalize online payment adoption, but it has improved significantly in the GCC over the last five years and especially so in the UAE, which has one of the highest credit card penetration rates in the world at a reported 199.4 cards per 100 people as of 2011.”

Alternate payment option trend

While the online payment infrastructure is improving and the trust factor is being established, travel brands are adopting various strategies to offer alternate payment option for customers.

Ahuja says:

“We have noticed a trend towards prepaid cards being preferred for online payments previously. We are now also exploring other payment options such as Bank Transfer and drop-off partners in malls to provide flexibility to our buyers in the region. While the increasing trend of credit card usage points to more online activity, there is still a significant population that shops online but prefers to pay in cash.”

Last month, Yamsafer launched a “pay at hotel” model in its website. Yamsafer customers can book and guarantee a hotel reservation without a credit card thus eliminating the traditional deposit fee requirements.

Once a Yamsafer user reserves a hotel by providing basic details on the site (name, email, phone number), a Yamsafer employee calls the customer to ensure that the reservation is legitimate and then guarantees the reservation.

Yamsafer says:

“Our team has spent the last six months providing a comprehensive solution targeting our customers who do not have a credit card.

“Now, with this new solution, we can provide great rates to all our customers, regardless of whether they are credit card holders or not.”

Yamsafer has also reached out to hotels who previously did not have an online presence in the Middle East region and has changed this factor by ensuring they are currently active in the online space.

Recently, Cleartrip also launched “pay at hotel” payment option where a customer can reserve a hotel online by just entering the passenger details.

Khatri adds:

“It’s because of the preference of Middle East customers towards “pay at hotel”option, players like have a lead over others in the market.

“A good number of hotels in Middle East have signed up for “pay at hotel” model with us, and we expect this number to grow.”

Reason for low online payment adoption

Leave aside the issue of payment gateway infrastructure issues, and card penetration in the Middle East market, Khatri from Cleartrip shares a very interesting reason for low usage of online payments.

He claims that there is no fear factor among customer when using cards online, rather the payment issue is to do with the travel pattern/behaviour in the market.

Middle East travellers have very high tendency to alter their travel plans – change in dates, change in cities, or cancelling the trip itself.

Khatri also notices a last minute booking pattern, in Saudi market the amendments to itineraries are continuous, and majority of the booking there happen with amendments. In case of Cleartrip, 60% of its mobile hotel bookings are last minute hotel bookings.

Interestingly, there is no standalone last minute hotel reservation service provider in Middle East, unlike in the US/Europe/APAC where players like HotelTonight, Hot Hotels, and Hotel Quickly respectively exist.

Do alternate payment options help in conversion?

Among the four companies that Tnooz spoke to, only Cleartrip and Yamsafer have “pay at hotel” options.

When asked about the possible conversion spike because of a payment option like “pay at hotel”, Dias says:

“I don’t believe that it will have a dramatic impact on conversion because several OTAs and hotels alike charge at the time of booking for their best rates.

“The real thorn for travelers today are the OTAs and hotels who charge travelers twice – first for their stay at the time of booking and then again for taxes at check-out.”

Though Musafir doesn’t offer “pay at hotel” option currently, Dias says the company might consider it, but at least not in the near future. On an average, one out of every four users of Musafir make the leap from booking a trip to purchasing it, says Dias.

Ahuja explains his stand about “pay at hotel” model and the challenges associated with it:

“Its still relatively early to predict the success of this model from our perspective. While this model circumvents the online payment issue, we feel it might add additional overhead.

“For instance, the customer engagement funnel is now stretched over a longer time period, all the way upto check-in date. In a region, where drop-out rates for offline channels can be high (and sometimes directly correlated with time), keeping the customer engaged throughout the process is key since there is no fixed cash-commitment from the customer.

“That said, we recognize the flexibility this model offers buyers as well and are keenly watching how it shapes up.”

Certainly, both Musafir and Triperna have their own reasons for not adopting offline payments. But, both of them are keeping an eye on the adoption of this model.

Ahuja explains the various steps Triperna has taken to increase conversion by keeping the online payment issue in mind:

“We made the checkout process very simple and transparent by adding information on our pages that adds trust and credibility to the process.

“We worked with our payment gateway provider (Payfort) to implement one-page checkout that completes a credit card payment process on our website without redirecting to an intermediate bank page.

“Some of these steps have helped us increase our conversion percentage significantly.”

However, Cleartrip remains bullish about “pay at hotel” model. The company expects about 20% of its hotel transactions to be executed via “pay at hotel” option by the end of this financial year.

NB: Middle East business people image via Shutterstock.

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Karthick Prabu

About the Writer :: Karthick Prabu

Karthick was general manager for Tnooz in Asia until September 2014.



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  1. Alex

    Excellent article! Living in North America among the middle class, you tend to forget that the rest of the world’s habits differ from yours. Articles like these are a great reminder of the bubble we live in and how we should look outside of our immediate surroundings and culture to learn more!

  2. Edward Mortimer

    Interesting article. For Tour Operators who are looking at capturing online payments in the UAE market, we have successfully integrated an online payment system with two merchant banks. They have seen positive results on having the ability to sell their tours online with credit card payment options


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