The good, the bad and the ugly – the truth about payments for tourism businesses

There is an ugly truth that very few travel tech companies seem to talk about when they rush out of the gates to satisfy the curiosity of hungry travellers starved for experiences.

That truth is the support for international payments, especially those for SMEs, is broken.

It is not just a case of payment systems not working or being too expensive for many small businesses, which in many cases they are, but the fact that for the most part, they simply don’t exist in many emerging markets.

Take a look at any of the recent startups in the tour and activity segment and you will see a familiar trend, they are mostly “marketplaces” where the startup takes payment on behalf of an operator and then sends money (less fees of course) to the operator (or guide) once the tour has been taken.

Most of these startups, not surprisingly, are also based in the US where online payments and transferring money via Paypal or an automated clearing house are not an issue.

Pain points

Why is this payment model so attractive for startups?

Firstly, it is an inflated measurement of revenues. When you are collecting 100% of the funds, it’s easy to say you made X amount of revenue and it’s just as easy not to mention that you only actually keep 10% or 15% of it.

It’s the same measurement that got Groupon into trouble during its IPO. It’s also attractive because it means the startup gets the money, first ensuring they get paid, rather than trying to collect commission from hundreds or even thousands of small operators.

Move outside of the US, however, and the problems become much more significant. You don’t have to go much further south than Panama to find that, although Paypal is accepted, a small operator can only withdraw funds to a US bank account. Not a very practical or cost effective solution for a small local business.

There is nothing innovative about the remittance model used by these startups, it has existed for years and is the same one used by companies like Viator and Expedia.

Even relative newcomers like AirBnB use the same payment scheme. It is a proven model and it works. But for anyone other than the occasional room renter or would-be tour guide it is simply not reasonable to wait for cashflow that is delayed by up to 90 days and costs upwards of 20%.

It is partly for this reason that only 8% of total revenues generated by in-destination tour and activity operators are generated through resellers.

Reality for small businesses

That’s the well funded tech startup landscape though, so what about the actual small operators? What kind of issues are they facing around payments?

The biggest problem that many of them see is not having access to the internet, SEO, or even having a booking engine. For many, the fundamental problem is that there is no way to accept credit card payments.

Ecommerce is built on the premise that customers pay something at the time of purchase and receive confirmation in real-time. Even if the payment is only a deposit or even a pre-authorization, the fact that the customer is paying with a credit card means that the business is assured that they will be paid for the booking they have received.

This is especially true for in-destination operators whose average ticket prices are less than $100. Without real-time credit card payments and the guarantee of a confirmed booking, the need to book in advance is all but eliminated.

This lack of access to credit card payment systems for small businesses has driven many to use aggregation services or resellers who can accept credit cards. But even the resellers and aggregation services have a limit on the number and type of tours that they are willing and able to sell.

The resellers have their own brand to protect after all. Supporting every tour and cutting checks for a myriad of suppliers each month is an administrative burden that most would want to avoid. Which leaves the vast majority of operators who want to take advantage of advanced bookings online with no way of doing so.

Recently there has been an increase in the number of alternative payment providers. Companies like Square, Brain Tree, and Stripe are trying to make credit card processing easier for small businesses in the US.

Unfortunately this still leaves those markets that really need a solution out of luck. In order for the in-destination global tour and activity segment to truly embrace the web, solutions to the payment problem must be resolved.

What can be done?

Given the fragmented nature of the tour and activity segment and the relatively small size of the businesses that participate, how can the problem be solved?

There are several ways to tackle the problem and unfortunately none of them are short term. The first is to educate operators on payment best practices and to get them payment ready.

This is best accomplished by regional or local tourism boards or chambers of commerce who have direct access to operators. An example of this is the Australian Tourism Data Warehouse (ATDW) and its tourism e-kit.

Simultaneously, the tourism boards can work with payment providers to streamline the process of providing merchant services to small businesses.

I realize that payment issues are larger than technology and involve the banking infrastructure and government regulation, but In order for the banks and merchant providers to support small business, they must see the business opportunity and economic benefits.

I think that merchant providers somethings take a myopic look at the payment landscape and think that if the locals don’t use credit cards then there is no reason to support it. But inbound tourists and travellers will be using credit cards and if you want to attract more of them, then the systems have to be there to take payments from them.

The larger business opportunity in the tour and activity segment is in understanding the economies of scale with the segment.

As PhoCusWright showed in its 2011 study When They Get There & Why They Go, the US in-destination tour and activity market alone is worth $27 billion and is 80% comprised of businesses that generate less than $1 million per year in revenue. Extrapolate that out to other regions and the global opportunity becomes compelling.

Travel-focused effort

I think the most interesting opportunity in solving the payment problem is for an established or startup company to try and tackle it in earnest.

I am not talking about creating another Stripe, Braintree, or some other service that is only available to U.S. businesses, and I’m certainly not talking about creating more aggregators or resellers.

I’m talking about a serious effort to try and address credit card payments for small tourism businesses in emerging markets in an affordable manner. To date, it looks like Paypal, as loved and reviled as the brand may be, is doing the best job of trying to support regionally diverse merchants.

Surely though, the market is large enough to make it worthwhile for other competitors.

Until the underlying problems around payment are resolved for the vast majority of operators, the in-destination tour and activity market will never truly reach its full economic potential and the majority of local tourism businesses will remain off the radar cash only operations.

NB: Cowboy hatcredit card mousetrap and card on water images via Shutterstock.

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Stephen Joyce

About the Writer :: Stephen Joyce

Stephen Joyce has been a contributor to tnooz since 2009 and has been working in travel and tourism technology since 1995. Stephen is the CEO of, a cloud based software as a service reservation and booking platform for tour and activity providers.

Stephen is the Past Board Chair of the OpenTravel Alliance and currently sits on the Education Advisory Group for the National Tour Association (NTA).

Stephen is a graduate of Capilano University, a certified commercial pilot, and holds a certificate in IT Management.



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  1. Credit card safety and cyber attacks in travel – everyone must take responsibility |

    […] a recent article, I discussed the lack of payment systems for small tourism businesses and the effect that this […]

  2. Steve

    I was going back through Tnooz RSS articles I have bookmarked and found this one:
    about the huge infrastructure built to handle the transactions.

    All that transaction and communication power yet there is not a simple solution to paying people outside the mainstream destinations.

    Musing on a Friday.

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  4. Paul Byrne


    Can you clarify the statement regarding Panama and paypal please? Are you saying that all international companies need a US-based bank account to be in a position to use Paypal? I don’t think this is the case, but I could be wrong.


    • Stephen Joyce

      Stephen Joyce

      Hi Paul,

      No, not all. If you are a merchant in certain countries, then you can withdraw funds to a local bank account. Some can withdraw funds to a local debit or credit card. Merchants in countries like Panama can only withdraw funds to a US Bank account. That’s the challenge with PayPal, in some countries you can take online payments but there is no way to actually withdraw the funds. You can find PayPal’s list of support countries here:

  5. Credit card safety and cyber attacks in travel – everyone must take responsibility |

    […] a recent article, I discussed the lack of payment systems for small tourism businesses and the effect that this has on local economies and access to diverse travel […]

  6. Will Plummer

    Great article Stephen which I think touches on a massive problem in the industry and one that needs to be tackled as you say – not just for the operator but for the convenience and clarity of the client as to who they are actually booking with.

    Having spent a long time researching this field I would say perhaps the biggest single issue is with the banks and card services providers themselves. The banks’ issues, I have found, are based more around them not wanting/needing to change themselves – very much “it’s square so it doesn’t fit in our nicely round hole” – ie on an individual company basis turnover might be quite small, and really they just pigeonhole everything as travel (and alarm bells start going off for them).

    Also don’t underestimate the Know Your Customer and compliance requirements that the banks want to see, and this goes not just for the credit cards but other methods of payments, which someone else touched upon. Card payments are popular in the UK but Germany, the US and Russia other forms of payments are more popular – so does the small operator have to offer everything? There is also the issue of the fees involved in these payment methods which can be quite hard on the bottom line.

    Trying to stay objectively in the response to the article without being self promoting we run on a central trust account model which gets over one hurdle and then obviously walks into the next – ie cashflow for the operator but I dont believe that this is not workable. It comes down firstly to working with your suppliers, managing the business on the books and having a tight control on your administration and bookkeeping. Or alternatively there is an end supplier insurance policy, as the TTA offer that allow money to be released in advance of the holiday.

    Having received the money I think distribution around the world is now much easier than it has ever been. All of the banks now offer international transfers and there are many forex houses like Transglobal Payments that can distribute the money quickly and easily for a much smaller fee (and a very good exchange rate). We use an e-wallet solution for our worldwide agents which costs them very little to distribute money using local means (and for local fees).

    One day it would be nice to think that the banks would sit up and realise that there is a problem in this sector, and an opportunity for them, but unless turnover per company is significant enough and a company has a long enough trading history, small enough chargeback requests and a cash surplus to put on reserve I cant see the square peg fitting.

    • Stephen Joyce

      Stephen Joyce

      Trust services like yours are certainly one solution. But I think you are correct, this is a problem that goes beyond technology. As I mentioned in the article, the banking and regulatory structure will need to be conducive to these payment systems in order for them to work effectively. There is no silver bullet but understanding that changes need to be made is a step in the right direction. This will be a collective effort.

  7. Payments in Travel and Tourism are a Real Challenge | Travel & Tourism Technology Trends

    […] is the norm, we need to face this challenge in earnest.  In my latest post on Tnooz title “The Good, the Bad, & the Ugly of Tourism Payments” I look at some of the challenges and some of the opportunities in payments for the tourism […]

  8. Daniele Beccari

    For anyone with a registered business, taking online credit card payments is relatively easy as far as you work with any decent bank.

    For consumers providing tours or renting rooms, Paypal/Google wallet schemes also work globally (more expensive than direct CC, but Paypal accepts CC so at the end it’s not too different).

    The real problem is in countries where CC is not a common mode of payment: Russia, India to name a few.

    • Stephen Joyce

      Stephen Joyce

      Exactly Daniele. US, Canada, UK & most of Europe, and Australia, New Zealand are fairly well serviced as far as payment systems are concerned. It’s all the other emerging areas that are struggling for a solution.

  9. anonymous

    Interesting, but surely there must be other global payment/remittance solutions besides PayPal? How do companies like Thomas Cook transfer money to their local entities around the world?

    Activity operators have to wait 90 days to get their money from resellers? Why would they ever agree to such a deal?

    • Stephen Joyce

      Stephen Joyce

      That’s a good question. Most likely they have commercial agreements with their suppliers where they either send wire transfers or cheques to their local partners.

      As far as the delay in payment is concerned, it can be even longer depending on when the booking is made. For example, if a customer makes a booking in May but is not scheduled to take the tour until July, the operator will get their payment in August (the month after the tour is delivered). That’s fairly standard.

      • Daniele Beccari

        Exact, but this established practice is unrelated to the method of payment. Users could pay with gold, blood or credit card, the supplier will still invoice their agencies monthly for all the services provided, and get paid sometimes later. Traveller protection schemes through escrow accounts and other similar considerations apply.

  10. Stephen Joyce

    Stephen Joyce

    Take a look at Paypal’s list of supported countries. This will give you a good idea of which countries are supported and how many can be withdrawn. Some allow direct bank withdrawals, others allow withdrawal to a credit or debit card, and others don’t allow withdrawal at all.

  11. Dee

    I’m curious on how many countries PayPal restricts? Is it many? It’s possible for Brazilian companies to withdraw to an account outside the US, to an acount in Brazil (and not to one in another country because of restrictions the government has put in). It does seem to me like if PayPal is restricting, then this would need to be a country by country solution. Probably with government support like the work the Ethiopian government is doing in the sme space.

  12. Steve

    I keep following Tnooz due to articles such as this. Well done in most cases, missing the point though that it is people that make travel work and not the toys. If you step away from the automation and look at the physical transactions it will be easier to see the problems.

    I have owned a travel agency in the US since 1984 (me and George Orwell wrote the book ). There have been some wonderful changes in the distribution of travel. Yet one area that has stagnated at best, deteriorated in some cases has been getting the money to the actual people involved.

    I’ll use a current example to highlight the issues as I seen them. I had a family who went to Costa Rica. They wanted to do things and stay at places that were not part of the regular package companies offerings. Having traveled through Costa Rica plus knowing the family they trusted me to make sure they had a good and SAFE time.

    Issues I faced;
    1. Contacting each hotel, transfer company, and tour company individually to find out about availability, price, commission policy, and payment policy.
    2. Foreign currency exchange.
    3. Wire transfer fees.
    4. Getting my commission.

    As it stands today, travel agents are paid via commission. On average that is 10%. In the U.S. the supplier would send me a check after travel. But with Costa Rica they can’t do that. Wire transfer? Yeah, but that’s at least $20 or more in bank fees. I could collect the money in advance and wire it to the companies myself, but I would incur the $20 to $40 bank fees. Oh, and most people want to pay via credit card which charges at least 3% – that is 30% to me. Lastly these transactions are not within the norm for U.S based travel agents so the inherent hassle is not worth it.

    This is just a micro view of challenges being faced by the folks on the ground who provide the services for travelers. Don’t look at my example as the specific problems, expand upon them.

    Credit card companies are tough and expensive on travel merchants, for good reason. The liability is high.

    Automation is not the answer either. The article hit a very, very good point – how to get the money to the actual service provider on the ground. What about getting the money to the agents actually SELLING the products? Automation doesn’t sell (it wants to), it just processes.

    That’s my thoughts for now. I’ve need to go sell something.


    • Stephen Joyce

      Stephen Joyce

      Great points Steve. I agree we tend to focus on the tools rather than the people. I think that tools are there to help make the communications and transactions between people more efficient. In this case, having payment systems in place could make paying the operator more efficient AND make it easier for the operator to pay its agent partners. Payment systems could also mean more transparency in the process making it easier for agents like you to track your commissions and payments.

      I know that the payment system that the GDSes had worked on failed, but something along those lines (without the over-complexity) could be one possible answer.

      • Steve


        >>In this case, having payment systems in place could make paying the operator more efficient AND make it easier for the operator to pay its agent partners.<<

        Not "could," "would." It does not matter how advanced, pretty, cool, widespread, or supported a technology based communication thingy (tech term) is – no robust banking / money / finance system in place means no sales.

        GDS's are outside the realm of what is needed. They're tech firms, not banks or financial firms. Much of the problem you correctly address is your article stems from small firms that have no need for the GDS offered solution. In fact, I'm one of them.

        Hmmmmm, more I think about it the GDS's do have the most robust communication network and have a standardized format. Know any financial firms that truly understand small travel businesses?


  13. Dee

    Payments via mobile phone can be used for online businesses, particularly in micropayments. I co-built a significant (non travel) business across several countries for which it played a major part and we started that business right at the end of the last century.

    – doesn’t seem to me that these travel products are true micropayments (which I think of as less than £10)
    – mobile phone networks take a bigger commission than credit card companies or paypal
    – the tour or activity provider needs a way to tap into a system which has a billing relationship with the consumer’s mobile operator

    These are the case whether it’s a payment in advance or on the ground though.

  14. Craig

    Finding a Paypal alternative has been one of my biggest challenges this year: and I’ve failed for NZ-based clients who want to take international bookings online.

  15. Stuart McD

    “It is partly for this reason that only 8% of total revenues generated by in-destination tour and activity operators are generated through resellers.”

    Another less-discussed reason being that many short tour operators instill an usurious markup (300-400% isn’t uncommon). This can result in a horrible user experience as the punter shows up and finds out they’re paying 3-4 times what everyone else is. The reseller cops the flack for that one — not a great deal.

  16. Jazz Poulin

    Facebook credits using my future Facebook phone….

    or maybe…

    (Google buys PayPal / Visa?) Google using my Android phone….

    Until then, with all the worry about international money laundering, tax evasion etc.. I fear we won’t see anything easy for those international businesses anytime soon.

    • Stephen Joyce

      Stephen Joyce

      Your Google example is not too far off I think. As far as the money laundering etc. it seems to me that having an electronic payments infrastructure would actually make it easier to detect and track that kind of behaviour. No?

  17. Stuart

    Surprised not more comments. Always good when travel experts look outside the US tech travel bubble

    A few points as to the Bigger Picture…

    1. When it comes to payments, I keep thinking of Africa and mobile payments. Is that do-able within travel especially in less developed countries? like, for example, the UK.

    2. Is part of the the problem (again in the UK) is that there are basically monopolies within markets ie in UK there’s a duopoly when it comes to transactions betweenBarclays and RBS/Natwest? Or maybe the bigger issue is that card cos can end up cleaning up a lot of the problems when small sexy companies (and bigger ones) go *tits up* due to a lack of responsibilty within the travel industry. That’s an issue that generally isn’t mentioned a lot in public…anyone?

    3. Other option is TTA. We started with them, for which I’ll always be grateful, plus there’s not many other options when you start with bugger all money, however they’re not cheap and the cash-flow issues can be tough. But they have issues – am being polite.

    4. Real ingrained change in the travel industry. Disruption. Change. A lot of the issues beloved of Tnooz thinkers. Can’t see it happening until this issue is solved. Sounds so easy to solve. But it really isn’t.

    Think of yourself as a Mafia accountant. Would you cough up for a coffee bar? Perhaps/ maybe but the VIG would be high. Heads you lose, tails you win. Coffee shop burnt down? Feck you pay me. All very Goodfellas

    It would be nice to see an intelligent scheme, maybe with some government backing, come along with some answers. Almost like a mini/mobile payment Co-op. Not very free market Tory. Like a Wonga Plus for business transactions, not debt.

    But hell it could work at 60p a debit card and 3.5% a cc (say 40% above normal rates). Maybe the financial sector, so beloved of successive governments, could actually do something useful, helpful and original. Of course that would involve cojones and long term thinking. Qualities in rather short supply in that industry.

    What was the bank in Bangladesh that whacked out micro-loans and had an amazing payback? That’s kind of what’s called for. Hmmm. Methinks we’re all looking in the wrong place.

    Top article Stephen

    • Stephen Joyce

      Stephen Joyce

      Thanks Stuart. I have a couple of answers for you:

      1. Mobile payments via phone is a solution for local payments but doesn’t really work for online/e-commerce payments. The idea here is to drive advanced bookings. Local payments are more for point of sale.

      2. Travel is considered high risk, but in-destination operators don’t fall in the same category because of the lower transaction costs and short delivery time. For example, local sight seeing operators (on our system anyway) average $200 transactions that are 5-7 days in advance. As far as the banks are concerned, a lot of it is the banking and regulatory infrastructure.

      3. The TTA is a uniquely UK model (from my understanding). I don’t think there is an equivalent for it in the US/Canada.

      4. No, it’s not an easy one to solve. But, in my opinion, it’s an important one to solve because it means a lot more money on the table for small business, local economies, and upstream distribution.

      Something like a micro-credit system for small operators in emerging markets could be a possibility. I have no idea how that would work but surely there is someone clever person out there who can solve that problem.

  18. Jeff

    Interesting issue, Stephen, thanks for this.

    I’m trying to wrap my head around it. Is the solution a service that lets non-US businesses accept payments online? Ex: Latvian bike tour operator has a website but can’t process credit cards and has to resort to accept cash when their guests arrive?

    • Stephen Joyce

      Stephen Joyce

      Yes. I think one possible solution is for a payment service to support non-US businesses to accept payments online. As I mentioned, Paypal and others are making some progress on this but the choices are very limited. This seems an area ripe for disruption.


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