By Kamran Hedjri
PXP Financial
So much planning and anticipation goes into booking a holiday abroad, yet many people arrive at their destination to find their preferred payment methods aren’t accepted locally. This article looks at how the preferred payment methods in the world’s top holiday destinations have changed since the Covid 19 pandemic, why APMs can cause problems for tourists, and the importance of accepting a wide range of payment methods in the travel sector.
Around the world, people are embracing alternative and digital methods of payment, enjoying the speed, convenience and security they provide.
Since the pandemic, preferred payment methods have shifted significantly in many of the world's top holiday destinations, driven by the desire for contactless transactions, digital convenience, and hygiene concerns.
Four years on from the first lockdowns, many European countries have increased contactless payment limits to encourage the shift, and mobile payment methods have surged, particularly in cities like Paris, Rome and Barcelona, where these options allowed tourists to pay seamlessly without handling cash.
In the United States, platforms like Apple Pay, Google Pay and PayPal have seen a boom, with both tourists and locals opting for these instead of cash or cards. Many tourist attractions, restaurants and stores in major cities have now moved to cashless models, citing safety and convenience.
Services like Klarna and Afterpay have also become more common, offering travelers flexible payment options, especially for flights, accommodations and luxury experiences. Even in Japan, which was traditionally a cash-heavy society, the pandemic accelerated the adoption of cashless payments, with QR-based systems like PayPay and mobile gaining popularity.
Despite this, one survey (see bit.ly/4foSgCf) revealed cash is still the most popular overseas payment method globally. Almost three in five respondents worldwide said they are likely to make payments in local currency on their next trip abroad (58 percent). It’s likely that, while APM use has surged in every region thanks to their convenience, they’re only truly convenient for local users.
While APMs have become more popular globally, limited accessibility, unfamiliarity and technical issues can pose challenges for tourists. For example, some mobile payment apps are region-specific. WeChat Pay & Alipay dominate in China but can be problematic for tourists who don’t have Chinese bank accounts or phone numbers.
Similarly, some digital wallets have limited international integration. Take MercadoPago; while it is popular among residents of Argentina and Mexico, it can be challenging for tourists because the app often requires local bank accounts or cards issued in the region.
In regions where QR code payments are popular (like China, India, or Southeast Asia), tourists can face problems if the systems require local apps or bank accounts to scan or generate the QR codes.
Exacerbating this is the staggered adoption of open banking, which is having a profound impact on the growth of APMs globally, leading to regional differences in how quickly and effectively new payment methods are being adopted.
Regions with mature open banking ecosystems are seeing rapid innovation in APMs, particularly those linked to direct bank transfers and real-time payments. Conversely, areas where open banking is still in its infancy are slower to adopt these new methods, relying more heavily on traditional payment systems like credit cards.
As open banking continues to expand, its influence on APM growth will surely increase, driving innovation, and choice in payments for locals and tourists alike.
The importance of overcoming these challenges cannot be overstated as each region moves ever closer towards becoming a cashless society.
Currently, Sweden is considered the most cashless society in the world, with only about 9 percent of payments made in cash, and many businesses no longer accepting cash at all. Even small vendors and street markets are more likely to accept mobile payments via apps like Swish or contactless cards.
The Netherlands, particularly in cities like Amsterdam and Rotterdam, is also quickly shifting toward a cashless economy. Many businesses prefer or only accept card payments, with iDEAL (an online banking payment method) being the most common APM for locals. It’s a similar picture in the UK, especially in London and other large cities, where contactless payments via credit cards, mobile wallets and apps are extremely common.
China is also rapidly becoming cashless, driven by the dominance of WeChat Pay and Alipay, and by the government, which is supporting a central bank digital currency (CBDC), known as the Digital Yuan.
Australia is another popular holiday destination that’s quickly becoming cashless, particularly in major cities. Here, contactless card payments and mobile wallets are now the norm for everyday purchases.
All this underscores the importance of accepting a wide range of payment methods in the travel sector. Alternative payment methods are expected to grow faster between 2022 and 2027 than payments performed with cards, and accepting a wide range of payment methods will impact the traveler experience, business revenue, and the overall competitiveness of travel companies (see bit.ly/48OXzbA).
Aside from the clear incentive of being better able to cater to global consumers, it’s also an effective way to reduce abandoned transactions. One of the main reasons customers abandon bookings or purchases is the lack of suitable payment options. In the travel sector, where bookings are often high-value transactions, missing out on a sale due to payment method issues can be a significant loss.
It's also an effective way to secure long-term customer loyalty, since people are more likely to return to a business that offers a convenient and flexible payment experience. Beyond this, there is a cost-saving benefit to accepting a range of payment methods. Not only do certain APMs offer lower transaction fees compared to traditional credit cards, especially for cross-border transactions, many also offer enhanced security features like biometric authentication, reducing the risk of chargebacks and fraud.
In today’s fast-evolving travel landscape, flexibility and convenience in payment options are essential for staying competitive and meeting travelers’ expectations. By offering a wide range of payment methods, travel businesses can cater to a global customer base and ultimately increase revenue.
But there are wider implications here. In embracing a wide range of payment methods, the travel sector has the opportunity to set the tone for a truly global payment system, one in which tourists enjoy the same convenient payment experience as locals. 
Kamran Hedjri is the CEO at PXP Financial, which provides a single unified payments platform to accept payments online, on mobile and at the point of sale. Hedjri has more than 20 years of experience in holding C-level roles in the fintech and payments industry. He has built companies across the payment value chain in Europe, North and South America. For more information, visit the PXP website at https://pxpfinancial.com, or connect with Kamran at linkedin.com/in/kamranhedjri.
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