Payments Dialog: Exploring Payments in the Travel Industry (a conversation with Nuvei)

On this episode of Payments Dialog, we welcome Jay Abbott, vice president of travel and mobility for digital payments with Nuvei. In this session we talk more about the unique needs of payments in the travel industry and how the evolution of technology is delivering the experience demanded by today's travelers.

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Rough Transcript of this Payments Dialog:

Peter Mollins:

Hi everybody. And welcome to payments dialogue. This is Peter Mollins with Spreedly. Really excited to have you here for another discussion. Today we're going to be talking about travel and travel payments. And I'm joined by Jay Abbott, who is the VP travel and mobility at Nuvei for VP travel and mobility for digital payments at Nuvei. So Jay, really excited to have you here and to have a chance to talk about travel and payments.

Jay Abbott:

Yeah, great. Thank you for having me as well Peter. Pleasure to be here. Yeah, looking forward to the discussion today, yeah.

Peter Mollins:

Terrific. Well maybe we can start off by first off, we're talking travel. So let's hear, what is your favorite travel destination?

Jay Abbott:

That's a good one. I would say there's many, but I'm just going to take what's recently. What we spoke about, which is related to the trip that I just took recently. I've just got back from Istanbul in Turkey. I've just spent four days there together with my wife. The reason I mentioned this city, I think it's wonderful. It borders, it's got both Asia and Europe in between it so it has two continents in between it. There's three bridges that are sort of linking across between it. And the history within Istanbul is just, it's history rich. That's a good way of putting it. It's wonderfully large, huge panoramic views. And my wife's family has a house there, they're Turkish. So they have a house over there. So it affords us to spend quite some quality time and checking out the city as well. So I would highly recommend if you do manage to get the chance to check out Istanbul Turkey.

Peter Mollins:

That sounds fantastic. Well, great. Well maybe you can tell me a bit about your background, how you got into payments at Nuvei?

Jay Abbott:

Yeah, sure, sure. Before payments I have a 10 year tenure in computer security. That's around ethical hacking. So I spent 10 years in the cybersecurity world which is fairly complex too, also quite similar in that way to payments. Then in my payments career, I started a company called Worldpay. Now it is Worldpay FIS after a number of different mergers that have gone on. And I was specifically looking in doing payments within the travel sector. So I did a lot of focus within the online travel agency world within Europe, Middle East and Africa. Those were the sort of regions that we were focusing on from the Amsterdam office where I'm based. And then I had customers like Etraveli. So more flight centric online travel agencies, Booking.com.

Jay Abbott:

If we look at even safaris like Go to Africa. So South African Safaris, those sort of things where we built global payment systems in for them as well. And then sort of started there and then moved into marketing technology for a couple of years and then [Uval 00:02:58] who's the managing director for us. He approached me and then said, I'd like you to join Nuvei to head up the travel mobility vertical for us as well. So I joined Nuvei on the, I think it was the 17th of January 2020, literally a couple of [crosstalk 00:03:15].

Peter Mollins:

That's incredible yeah.

Jay Abbott:

Yeah, yeah, yeah. Wonderful timing. I joined [inaudible 00:03:21] and then the pandemic has to hit up travel. Yeah, it was wonderful.

Peter Mollins:

Amazing.

Jay Abbott:

Yeah, yeah. Couldn't think of better timing.

Peter Mollins:

Yeah. Well maybe you can tell me a bit about, I'd love to hear a bit about Nuvei. And particularly what your plans are for Nuvei in the travel space and you what the success of has been for Nuvei in the travel space.

Jay Abbott:

Yeah, sure. Yeah, sure. So I mean Nuvei in the travel space, we are fairly new. I think what's good to understand about Nuvei is a bit of its history to where has it come from obviously and then we can get into the where we are now. And I think it's fairly relevant for where we do stand right now. And of course, where we want to go in the future. Nuvei itself is basically, they bought out a company called SafeCharge and they bought them. SafeCharge was a very robust technically focused payments gateway within the gambling, 4X gaming sort of the pure verticals that are happening. And it was a merger between, well merger, it was an acquisition, but it's merging two companies which is mainly the European focus side and Nuvei itself is North American.

Jay Abbott:

And you could see the North American side had something close to approximately 50,000 sort of SME style customers. More sort of retail focused, partner focused. And they put everything underneath the digital payments gateway which is essentially the safe charge technology. And the reason they did this is because the technology is really built. It's very superior in relation to it. And within the gaming and gambling, there's pure play verticals. The technology itself like 50% of the global gaming and gambling transactions are going through this gateway.

Jay Abbott:

So it's very robust and it has all sorts of nice sort of funky features and things that are actually quite old for the gaming and gambling verticals. But you could say they are very new and rich for new verticals like us. So he asked me to come in to sort of take over those. There was some level of focus on the travel verticals themselves but it was not given its full attention to that. And then that's where I sort of joined. As far as planning goes, and then sort of where are we at now and what do we want to do? So obviously I entered the pandemic. Which was like as I mentioned, wonderful timing. It was a bit awkward because, let's say this, I had a lot of time to plan.

Peter Mollins:

Yes, that's what I was going to say yeah.

Jay Abbott:

Yeah, yeah. And of course I think planning combined with execution is obviously key otherwise there's a bit of hallucination there. But we did a lot of plans around this and actually did quite some active work around it because for Nuvei, if you look at the position, we are new to the travel vertical. So we did not have a lot of these existing customers of books and our reference will pay FIS because I worked there and I know them a little bit. They had let's say 90 plus airlines that are in their book, those sort of things. We have a handful of airlines. So we are just fairly new and starting out. So that actually worked quite a bit in our favor if I look back at it. In relation to that because we're able to prepare and plan for this.

Jay Abbott:

And I think now you see a lot of these sort of movements happening between us and these sort of companies within let's say large global acquires because they're not able to have the same level of appetite as acquirers to take on board these companies. And Nuvei has exactly the opposite. Because we are new, we have more risk. We have more appetite to deal with those. And we have some solutions that we're able to provide for them as well which I would say puts us in a fairly favorable position to grow the vertical.

Peter Mollins:

Right. So now, as you're thinking about bringing those new customers on and have that appetite for bringing them on, are there distinct pains that are standing out like business pains that you're seeing among those prospective customers and those new customers?

Jay Abbott:

Yeah, sure. I mean the pandemic really helped to clear out a lot of those pains and what's going on. I mean at a high level it's showing up what the old world is not seeing here. And it's throwing in a lot of curve balls in here in relation to this. And particularly around the financial risk area. And I don't know if people know this and maybe a lot of them do, but maybe I'm preaching to the choir here, but I mean I think it's important to understand the relationship of an acquirer and a merchant within travel. So someone that's an airline or a travel company that has the gap between when they book and when the delivery of the services later. And that basically means like for example you book a flight on the 1st of January and then you're flying let's say on the 1st of March or something like that. The delivery of the service is later but the payment is earlier.

Jay Abbott:

What happens in that sort of period there for the acquirer? And this is the relationship that we as an acquirer will pay or [inaudible 00:08:17] or our competitor landscape that are doing this for many years has to deal with is if the merchant goes bankrupt. So if the airline goes bankrupt, or if the travel company goes bankrupt. And the pandemic, it happened because of this. This is the reality. If they go bankrupt, the acquirer has to pay for that unflowing revenue. The money that's been spent or booked and spent here but the service is not being delivered. And I can tell you, in some cases here Peter, we are talking annually if you're for example flying and you're doing let's say a billion in flow for revenue or turnover there and there's a gap of 45 days that's 120 million that the acquirer is on the hook for annually. You'll break it down into months, but that's 120 million of annual risks that you have to cover. It's ginormous and a lot of people don't know this.

Jay Abbott:

That's why I think it's important to explain this is what the acquirer is doing. They're underwriting that risk. And at least my experience tells me, I could be completely wrong here, but this is at least for my experience it is right. That this is not openly talked about that much. I mean I was on a number of these sort of travel panels, it's focus right, at different airlines events, at travel events, talking about this. And we were sitting in there and no one knew what I was talking about when I talked about the acquirers risk. So these are the things that are coming forward here because they need the right level of attention in order for people to understand if they don't cover that risk, we can't process for them.

Peter Mollins:

Right, that's amazing, yeah. And how do other kinds of risk enter into that equation? You think about cancellations now in light of COVID or are there particular fraud issues that you see in particular in travel?

Jay Abbott:

Oh, absolutely. I mean if you looked at all the vouchers where you are pushing bookings to a further date that's happening. So you have cancellations but then you don't have cancellation, you have vouchers, but you're still a booking, but they're actually pushed forward in a period as well. That's extending that risk end for us because in effect, the service delivery is still even longer. If you talk about fraud, there's all sorts of fraud. So there's friendly fraud that's happening because people are booking a flight and they're canceling but then they're saying that they've rebooked it as well. So you're getting double bookings that are happening on it too. And then they're asking for a refund on one booking and then trying to get a voucher for the other booking that they've had there and continue with it as well.

Jay Abbott:

So you see a lot of these overlaps for it which has been for the acquirer and the merchant. So the airline themselves, it's been hugely troubling for them to actually deal with this because this is new. This is what's gone on because of the impact of the pandemic. And it's starting to settle now which is fine. I mean what are we, one year, six months further into it. So one and a half years further into it. But the modeling behind how we collectively as acquirers and the schemes visa MasterCard have to evaluate risk it needs to be updated. It needs to have a look at this. And if we don't do that, then we are going to have issues in getting the ability to be able to process for these travel companies because they're doing all the right things to get everything ready for it. But if they can't actually process card payments which is the majority of what travel payments are, is credit card but they can't do it.

Peter Mollins:

And those things impact us as consumers too because now that affects the cost that they're going to in many cases pass on to the consumer.

Jay Abbott:

Yeah. And you could say and the cost in it as well. But like I said, with some of the events that I was sitting in, it literally was more like, do you guys realize that no matter all the marketing work that you do, if you don't work with the acquiring partner to make sure that you guys cover the financial risk properly and understand that financial risk, you can market all you want but then you just can't, you can't even turn on the pay or the book button. They literally will pull away from it. So what's sort of happening here is for example, let's just take the airlines as a sub-vertical within travel. Airlines particularly it used to be a lot of the times where they would go around and put out an RFP and then they would basically ask a couple of the mainstays or players that would be involved in to be involved for processing for card payments and what they're doing.

Jay Abbott:

Now, it's flipped the other way where they're coming to us to have a look at this because the airlines that were involved in taking the large majority of this are saying, hey, hands off, travel is now ultra high risk. I don't want to deal with them. You had Warren Buffet pulling out of airlines for example when the pandemic hit. He said, I don't want to invest in these things anymore. It's too complex, this and that. Understandable. But they didn't help the confidence of some of these things as well. So a lot of the acquiring banks, they pulled back and said, I don't want this. So they've given these merchant in some cases, 30, 60 or 90 days to find a new payments partner. And that's not doable I can tell you. It takes them half a year, usually a deal cycle for us is 24 months.

Peter Mollins:

Is that right? Wow, yeah.

Jay Abbott:

24 months for your larger parts that we're dealing with because there's so many complexities. I won't get into too much. The backend systems that you're working with, it's huge. So imagine you're put into that case where your requirer says by the way, we're not going to process anymore cards for you anymore which is 90% of how you actually transact with your customers because customers want to feel safe. That's why they purchase large ticket items with their credit cards. And then they go through from there and they say, no, we're turning it off. Don't know what to say to that. Other than you need to go find a payments partner, good luck.

Peter Mollins:

Absolutely yeah. Well, so if we flip this the coin I guess if you will from fraud to the other side in improving approval rates, are there particular things getting authorization rates up and success rates up? Is there anything particular around the travel industry that you'd like to highlight there?

Jay Abbott:

Yeah, I think that's a really good one. I mean once you get all this stuff let's say operationally working and doing things right. And then the approval rates itself I mean it's really a balance between, it's highly complex but I'll give you the main components that are involved in here to how this sort of works. So if you look at a lot of companies are looking for what we call domestic or local processing. And what does local or domestic processing means? It means that your costs are going to be lower ideally and your approval rates are going to be higher. And we'll get into both because they're both intrinsically linked and very relevant. So if we look at it from that perspective, what does that mean? That means for the three components that you would need in order to have local processing which will give you best approval rates, you need to have a legal entity in the country that you are basically looking to process in.

Jay Abbott:

So for example, if I'm here in the Netherlands, I've got a legal entity in the Netherlands. The second component that you will need to match with that is to have a local acquiring license. So for example Nuvei or WorldPay or [inaudible 00:15:59] or all of your main players. We have European acquiring licenses that allow us to do domestic processing or local processing here in the Netherlands. So they've got a legal entity. The merchant has a legal entity here. We've got the domestic license or the ability to process domestically. And then the other part is the cardholder, where the banks are renting from. So Dutch cardholders would be ABN AMRO, ING Bank, all the standard stuff that's in there. If those three components met, then you get what you call domestic processing rates which are a lot cheaper than your international processing rates.

Jay Abbott:

That's one thing there that'll give you best approval. And the reason it'll give you best approval Peter is because well just to everyone is because there's a clear trust. I know who the company is. I can look them up in the tax thing. I can see that they're KLM. I know that they have a local license for acquiring here from Nuvei. So that's another one. And I know the bank card is ABN AMRO. It's not coming from another country like New Zealand or Nigeria or wherever. So the trust relationship is key here. Therefore, once that goes through the payment system, it's approved. And that's going to give you better approval there on those things. If you get domestic processing and it's going to give you cheaper, total cost of processing which is exactly what every merchant wants to have.

Peter Mollins:

So cutting costs, that's great. Getting authorization rates up. What about the customer experience? How do you see payments as being part of a great customer experience in the travel world?

Jay Abbott:

Also a good one, very relevant. So customer experience. I mean, if we are looking at, do we mean more from the consumer perspective if you're saying like [crosstalk 00:17:49]

Peter Mollins:

Yeah, exactly. So the end consumer coming to a travel site, yeah.

Jay Abbott:

Yeah, exactly. So I mean payments flow is key here. So this is key to have a look at it around how they go through to the point of the checkout. And the majority of the experience for most of the payments part is actually going to be towards the end of the funnel. This is where you book, the buy, the pay button and then move on from there as well. But it's important that you can start out with it in front end as well. So this is important that you can select for example, look from a localization perspective. You can select your local language. You can make sure that you have your local currency already preselected for you. So you've got all these pre functions that will come up front there.

Jay Abbott:

But for example let's say I'm from New Zealand originally and let's say I've just come over to Europe here. Maybe I want to see everything in New Zealand dollars. So I'm in Europe, my IP address is showing Europe. So they show European flights and I'm on a Booking.com site. Then I can change my currency to the local currency, New Zealand dollars which I'm more happy to see that currency because that's something that I relate to. If I'm from South Africa, I see South African Rand, it's quite a different currency to Europe in respect to it. And I feel a lot more comfortable and ease to actually make the purchase when I get down to the end of the funnel. And then once you get to the end of the funnel, if you talk about making sure that it's there, you need to make sure that you have the right payment experience meaning the right payment methods that are actually put out front for you.

Jay Abbott:

That's a really key thing to have. So you need to make sure that you offer visa, MasterCard, Amex, whatever the the consumer would be having. But if you're coming in from China and you start offering visa MasterCard, this is like a less than 5% of the market share that they have visa MasterCard. They have to complete, yeah so we have China union pay, or you need to have We Check pay or these relevant payment methods. So know who your consumer is and where they're coming from. And they need to be able to provide those. And then we have for example features like decline recovery which is a really nice one on our gateway on the front end where you can basically if you put in the wrong pay payment method and it's declining, it'll give you a second option. So then you have the ability to come up for example and see PayPal or another option that would be a nice payment method that you could use after it as well. So these sort of things to make sure the transaction flow is as seamless as possible. Yeah, I think that would be key.

Peter Mollins:

That makes sense. Yeah no, that makes sense for helping us give more options to the consumer to help them self select for a great experience. So that's great.

Jay Abbott:

Yeah because sometimes you might have money in your I don't know, let's say your MasterCard is maxed out or something like that but then you are moving on to your visa card you've got a visa card or an Amex. And it pops up with the Amex as well. And then you say, oh, okay. Yeah, I can try that because often you might do the visa card and then you're like, okay I'll leave. But then it prompts you and says, no, do you want to pay with this payment method? And you go like, yes, bang.

Jay Abbott:

Those sort of things to ensure the checkout experience. Localization is key. Just making sure everyone's comfortable that they're feeling like they are important because they have their cultural experience is important for them. The cultural nuances from like I said, currencies, payment methods, those sort of things is key. And also making sure technically that you're are able to do this in a very time manner because speed is key. If you're going to get a booking, you want to book with speed as well. So you need to make sure that it's going to be transacting in a very quick way too.

Peter Mollins:

That makes sense. Now, last question for you. We're seeing a lot more sophistication. It seems like I'm definitely seeing a lot more sophistication among payments professionals and of the teams that are at merchants and platforms and hearing a lot more about a mention of payment orchestration. Just wondering if you're hearing that notion, the notion of orchestration in the travel industry and if you have some thoughts there.

Jay Abbott:

Yeah. I mean I think for anyone that's sort of a bit deep in travel, understanding this is a sort of, I think it's even beyond buzz now, the orchestration of it. But the premise of it I think is wonderful because there's so many backend systems and things to basically deal with here. The idea is to have a layout that sits in between here. I mean Spreedly, you guys are great for these sorts of things. So that you can basically do away with all of the issues of constantly creating your own gateway and having to give all the connections and partner connections to the GDSs, to the internet booking engines, I don't know, to the property management systems. So all the different components or parts are the sitting in there. And there's a myriad of them, I'm just starting with them. And all that complexity but you can just plug into one layer.

Jay Abbott:

So if you think of that from a conceptual perspective, I think it's wonderful. The execution of it, I think is developing and growing because you've got a lot of old, let's say that technology that needs to be honored. It needs to be renewed, it needs to be looked at. And we're moving a bit more into the new here. And I think that most of the time would generally mean there is some sort of level of progression to slowly move towards that. But I'm an advocate of payment orchestration. I like the idea that you can smart route for example between different acquirers. I certainly don't believe in the idea particularly if you are a large travel company or a large airline or a business that you put all your eggs into one basket at every single point of failure. So I think it's very important that you balance that risk between the different acquiring partners particularly now for example with financial risk. The acquiring partner will not take all of that risk generally if you've got quite some flow that is going through your system, they don't have the ability to underwrite that risk.

Jay Abbott:

So therefore it prompts you to have an orchestration layer or something that can send different traffic in different ways to the different payments partners. So I like the idea and I'm a fan of those sort of things. And I'm also a fan of what I will call a sort of post-pandemic economy where we share. I think there's enough room for everyone in here. And I think there's a responsibility for the payments partners and providers that are sitting in there to help rejuvenate travel as quickly as possible. I think it's good for business, it's good for many things, leisure wise, all of these basic stuff. And if we can share that stuff and share the responsibility to do that, there's enough there for everyone to live and profit from.

Peter Mollins:

That's a great spirit to conclude on. So Jay, I've really enjoyed this conversation. It's fascinating to hear your opinions, especially about the risk. Just hadn't really thought about or had heard about that notion of that risk on prepaid travel. So fascinating to hear that and thank you again for your time.

Jay Abbott:

Thank you for having me. It's a pleasure, anytime.

Peter Mollins:

Absolutely. Thanks. Jay Abbot again with Nuvei.

Jay Abbott:

Bye, thank you.

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