As Bitcoin surges, will cryptocurrency become an accepted form of payment in travel? – PhocusWire

The wild ride of Bitcoin has dominatedheadlines in recent weeks. The cryptocurrencys value stands around $50,000 forone Bitcoin this week compared to about $10,000 a year ago and around $400five years ago. Bitcoin is just one of thousands of cryptocurrencies inexistence - and many of those are also surging but it has by far the highestvalue.

Since Bitcoin first appeared in 2009as the original decentralized digital currency, i.e., not controlled by banks ora government, a handful of travel companies have come to accept it as a form ofpayment.

One of the first was online travelagency CheapAir, which began accepting Bitcoin in 2013. Originally the companyused a third-party processor to convert the Bitcoins into dollars which couldthen be paid to airlines and hotels since virtually all suppliers stillrequire payment in fiat currency. Eventually, the OTA built its own processingtechnology for Bitcoin to manage the exchange itself.

CheapAir co-founder and CEO Jeff Klee says that the needto exchange the cryptocurrency is one of the roadblocks to widespread adoptionin the travel industry.

It would be much easier for everyoneif the suppliers would accept crypto. Its a bit of an ordeal when the supplierdoesnt, so we have to exchange into dollars and pay the supplier separately,he says.

Thats what makes it unattractiveto a lot of travel intermediaries. Theres a lot of infrastructure you need,training you need for your frontline agents to support it when customers call.We decided to commit to it, so we built that infrastructure and its a big partof our training.

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Even with that commitment, Klee says cryptocurrencystill accounts for just single digit percentages of CheapAirs sales. But therehave been positive aspects.

We really value and appreciate our Bitcoincustomers. They tend to be very loyal, and they tend to buy more expensiveproducts ... first-class tickets and luxury hotel accommodations, he says.

Spain-based OTA Destinia has beenaccepting Bitcoin since 2014. Managing director RicardoFernndez says that while it only accounts for about 2% of the platforms globalsales, offering payment in Bitcoin has enabled the site to attract a niche ofcustomers around the world that own and want to spend cryptocurrency.

But, he says, that relationshipbetween holding versus spending cryptocurrency is changing, something echoed byKlee.

Until 2020 the relation between priceof Bitcoin and number of bookings was direct - the higher price, the higherbookings. In 2020 when Bitcoin started to go crazy, the relation started to beinverse. So if price is growing, the number of bookings is decreasing because peopleare now looking at it as an investment, Fernndez says.

That hasnt been the case for Travala, an Australia-based OTA founded in 2017 that offers more than two millionaccommodations around the world and in two weeks will add tours and activities.The sites primary cryptocurrency is Bitcoin, followed by its native AVA tokenand 25 other cryptocurrency options.

Co-founder and CEO Juan Otero says Travala is processing about one million dollars worth of bookings each month and about 70% of thatis paid in cryptocurrency, for which the company has built paymenttechnology to manage the exchange and payment in fiat to suppliers.

He says broader adoption of cryptocurrencyis inevitable.

We are just at the beginning of whatwill be a true financial revolution where people will move away from fiat andinto cryptocurrencies, Otero says.

When you pay with crypto, its nearto instant, its near to free, its privacy preserving everything thatblockchain technology offers you is something you have when you usecryptocurrency to pay. Plus no added credit card fees, or waiting for a paymentto be processed or denied. All the issues and costs with traditional creditcard payments are removed when you pay with cryptocurrency.

That doesnt mean cryptocurrency is withoutrisk, cautions Thomas Helldorff, vice president for airlines and travel at Worldpayfrom FIS.

If you accept a Bitcoin as a form ofpayment, then you have to live with the risk that by the time you accept it,then you eventually convert it to your currency, that Bitcoins value mayfluctuate up or down and that may significantly erode your margin, Helldorffsays.

Travel companies with a very thin margin are not in the game of speculating with currencies.

Thomas Helldorff - Worldpay from FIS

Travel companies with a very thinmargin are not in the game of speculating with currencies.

Instead, Helldorff says he would liketo see governments or central banks issue their own digital currency, whichwould facilitate more modernized payment processing while providing thestability of being backed by fiat currency. Currently, central bank digitalcurrencies are in various stages of exploration and development in countries includingChina, Singapore and Sweden.

Governmentally backed digital currenciesare simply a digital representation of the currency that they represent. Their valuedoesnt change, Helldorff says.

And it is a digitally certifiedpayment instrument that you cant alter, you cant fake, you cant change. Thatsthe next evolution.

Helldorff says airlines and othertravel suppliers should begin preparing for this shift now developing standardsand systems to connect a digital payment type to a travel record.

We all know it takes years for thesespecifications to be endorsed by IATA, by everybody, so I think its the righttime when we are not terribly busy while we are waiting for things to get better. ...We might use some of this time to think about whats the next big paymentoptions, get prepared and maybe be the first industry to be able to cross-borderaccept those currency units, he says.

By linking central bank digitalcurrencies to a smart contract a mechanism inherent to blockchain-basedcryptocurrencies the process of payments between travelers, intermediariesand suppliers would be faster and frictionless.

Helldorff says this automationcreates a significant advantage that will eventually motivate broad adoption ofsmart contracts and distributed ledger technology by the travel industry.

With a smart contract, there are definedrules for what happens in what situation and the money just bounces around becausethere is no need for clearing and settlement, he says.

Theres no invoicing and banktransfers and checks going forth and back to make that money flow work. Thebooking, the order itself, holds the financial value or access to the financialvalue and distributes the financial value as per order and moves the moneybetween the players as the services get executed or as the contract stipulates.

"This is how I see the future of settlements happening in the airlineecosystem.

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As Bitcoin surges, will cryptocurrency become an accepted form of payment in travel? - PhocusWire