Change is constant, yet change is hard. That’s the quandary many in the travel industry face, especially as it relates to distribution. Tried and true technologies continue to operate as designed decades ago, with speed and reliability. However, changing traveler demands and nearly universal access to information have some calling for new designs. Kurt Knackstedt is CEO of robotic process automation firm Troovo. Considering the emergence of new players in travel, he sees an analogy with disruptors impacting the banking industry and longs for collaboration.
Having spent a fair bit of the past 18 months at the confluence of travel and payments, I’m struck by what I see as an emerging and interesting parallel between the travel industry and the banking sector.
Banks have for generations provided services and products that are highly oriented towards profits for the banks themselves without much pressure to change. They not only own the products they sell (loans, mortgages, insurance, etc.) but also the distribution channels (branches, websites, apps) that bring those products to market.
Interestingly, the banks are now under threat from an emerging force that many of them didn’t anticipate, or worse, didn’t recognize for their potential impact – technology startups. These upstarts like Square, Stripe and Venmo didn’t get cowed by the banks’ power or ownership of products and distribution. They just found ways to make great ideas for better customer experiences available to the masses. Fintechs have become the darling of private equity and venture capitalists. These firms find clever ways to change the way people pay for things, finance their futures or exchange money all around the world.
For a long time, the airline industry operated much like banks. Airlines often were monolithic or oligopolistic, owning both the seats and flights as well as the distribution channels that brought those products to market. One major difference, of course, is that airlines divested themselves of the distribution channels years ago. But what remained was still a fairly regimented, static and slow-changing approach to selling the products and services of the airlines.
We are now seeing an emerging landscape for travel not dissimilar to what emerged in banking and finance over the past several years. It is one in which non-traditional players quickly move into a new space opened up by technology and driven by demand for change. It’s fintech for the travel industry. “Distributech” could be an apt descriptor.
In the distributech world, much like the fintech world, it will be interesting to watch whether incumbents decide to work against or with new players. No doubt some will push back, favoring existing and proven methods for selling travel services as a stable and efficient approach. That’s reason enough to maintain the status quo, some will say.
Distributechs, however, will point out that there are still tremendous inefficiencies within current options. Many of these inefficiencies have manifested themselves into well-documented frustrations by those actually paying for travel services, specifically travelers and travel managers. Thus, distributechs have a significant opportunity to remove those inefficiencies for long-term change in the industry.
Similar to what we’ve seen in banking and finance, distributech players now drive significant change. That affects how travel is shopped, sold, processed, analyzed and settled. Bots are making bookings on travelers’ behalf. AI is predicting the best time to buy a seat or a hotel room, or changing what you’ve already done when a better deal comes along. Robotics can decide how to process your booking, how to pay for it and where to send it when it’s completed. Virtual payment solutions enable a fraud-free and digitized way to pay for everything you need to travel. All of this can now be done with either traditional or emerging distribution platforms. Much of it does not require any people to do the grunt work.
That brings me back to a striking parallel I see between fintech and distributech: clever new players are adept at working with existing systems while at the same time pushing the industry into a whole new world of customer-centric solutions.
At a recent fintech event I attended in Singapore, I was amazed when watching the “suits” (bankers) versus the “sneakers” (fintechs). On panel after panel, presentation after presentation, it was unsurprisingly easy to predict what each side would say. The suits would say that “new entrants don’t understand legislation or regulatory challenges.” The sneakers would reply by saying, “We deliberately are trying to come up with solutions that don’t require regulatory or legislative oversight because you only need those things when consumers aren’t being looked after properly.”
In short, the suits relied on traditional lockouts to keep new entrants at bay, while the sneakers ignored those barriers. Instead, they used customers’ relentless demand to find better ways to do things.
The friction and the “us-versus-them” nature still is relatively pervasive in the financial services industry. I am hopeful that in our industry we’ll find a way to look good in a suit whilst wearing sneakers. We should work collaboratively to embrace change. Driving it forward together and enabling new players to thrive will be for the betterment of the entire industry.
Sure, there are bound to be some missteps and many will try to use those as reasons why we should keep things as they are. But banking is undergoing a seismic disruption due to the status quo hanging on too long. I hope that our industry can avoid that type of stress by redefining why we do what we do and how we do it, rather than focusing on who should determine how we do it.
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