Buy Now, Pay later (BNPL) reinterprets financing to make it highly attractive to consumers and businesses alike. It increases the likelihood of a sale by up to 30% and the average size of a sale by 50%. The attraction of BNPL is so great that the total value of BNPL in e-commerce is expected to reach nearly $400 billion by the end of 2024

It is also taking off in a big way with Online Travel Agents (OTAs) in the travel industry, where it is known as Travel Now, Pay Later (TNPL). BNPL market leader Klarna already enables OTA customers to book flights and hotels on Expedia and Lastminute, spreading costs over instalments. Kayak has partnered with BNPL provider Affirm. offers both.

Beyond the OTAs, tour operators and travel agents have been slower to adopt TNPL. One reason is that this segment of the travel industry has so far been largely ignored by BNPL behemoths like Klarna. Another is that operators and agents have been, until recently, less digitally focussed than the OTAs. Most are based on a business model that emphasises service excellence rather than tech innovation. That is changing and, assisted by the extreme flexibility of tech-advanced banking infrastructure, new generation fintechs are now delivering TNPL solutions to the European travel market, currently estimated to be around €250 billion in size.

TNPL is even more attractive for agents and operators than for OTAs

That might seem counterintuitive, because a holiday, once taken, cannot be “returned” in the way that a dress or bike can. If the customer is unable to pay, then there is no residual value to be extracted. 

The key point here is that agents and operators are fishing in a different pool from the OTAs. OTAs typically sell hotels, flights and other services separately, without the option to purchase a complete tour package. This distinction is crucial as you can book a hotel and a flight separately through an online booking platform, which may end up being more expensive. Agents and operators are rooted in long-standing contracts and relationships with hotels and airlines, which allows for the creation of cost-effective packages. 

The emergence of Online Travel Agents (OTAs) and budget airlines has significantly simplified trip planning for travellers, particularly to popular destinations. However, the effectiveness of these conveniences may vary when it comes to traditional tourist spots for package tourism, such as Egypt, Turkey, Greece, Spain etc. Essentially, OTAs and agents/operators are not in direct competition because they cater to different needs.

Tour operators and agents often enjoy higher margins due to their ability to secure commitments for future demand. The trade discounts available to them from accommodation providers and transportation service providers, could be over 30% which create a healthy headroom for profit. In the context of TNPL, a two-month interest-free period typically represents a 4% loss of revenue to the operator — which can be regarded as an acceptable promo discount if it means winning new sales. 

Less working capital

There’s another huge upside for operators. Under various consumer protection laws, the EU Package Travel Directive, for example, operators are obliged to hold the money for holidays they have sold in travel trust accounts until a customer completes their travel. If something happens — a hotel closure or airline bankruptcy — they have to return the traveller’s money. 

That is a massive financial commitment. If a customer pays a tour operator €1,000, the operator has to hold that in the travel account (a bank account holding collateral for a bank guarantee). This means, before sending a tourist on the trip, the tour operator needs to pay in advance for any rooms and flights and hold €1,000 in a bank, effectively doubling their outlay. They can only access the customer’s payment when the trip is completed.

A €5 million travel trust account is not uncommon, while also needing to pay hotels and airlines in advance. With TNPL the bank covers the payments, with the traveller becoming liable to the bank only after the trip ends. This shifts the obligation onto the bank, reducing the amount of deposit guarantees needed by the operator from €5 million in our example, to €2-3 million. 

TNPL tech options

Consumers benefit too. By levelling the playing field between operators and OTAs, and integrating TNPL solutions into operators’ sites, it makes the customer journey much more convenient and consumers can access the best deals, at the time that suits them. At the same time, as a bank, we secure a significant margin by providing liquidity to tour operators and agencies. It’s an intricate process that involves a lot of work and detailed understanding of the mechanics of discounting and interest rates within the sector. 

With agents’ and operators’ revenue growth predicted to barely keep pace with inflation over the next three years, TNPL provides an important new opportunity to expand sales among a demographic that is otherwise being squeezed out. With the OTAs already on board, the tour operators that grasp TNPL fastest are going to be the winners in the coming period of intense competition.  

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