The online travel industry processes billions in transactions annually, yet payment complexity remains a formidable challenge. Falk Richter, former Senior Vice President of Global Payments at Expedia, shares insight into the intricate payment ecosystems connecting travel agencies, suppliers, and consumers. Richter reveals why travel payments are vastly more complex than typical e-commerce transactions, identifies emerging opportunities, and offers strategic guidance for payment providers eyeing this lucrative market
1. Walk us through the typical payment process between online travel agencies (OTAs) and their partners (airlines, hotels, and car rentals) – who pays whom and when?
There is no single “typical” payment process in the OTA space — there are hundreds of distinct use cases that require equally numerous payment flows.
There are three high-level core business models:
- Agency model: The OTA is an intermediary and does not collect payment. The traveler pays the supplier directly, while the OTA receives commission payments from the supplier afterward.
- Payment facilitation (payfac) model: The OTA also collects the traveler’s payment on behalf of the supplier, effectively providing a financial service.
- Merchant model: The OTA is the merchant of record, collecting payment from the traveler and later paying the supplier after deducting its margin. OTAs often hold the funds from booking until the stay.
2. What percentage of transactions do online travel agencies typically handle on behalf of their partners versus direct consumer bookings, and how has this shifted in recent years?
OTAs have been around for 30 years and their share of bookings has trended upward, largely at the expense of smaller agencies and intermediaries, while supplier-direct channels have stabilized or grown in recent years. The OTA share continues to gradually rise today.
For example, large global hotel chains often generate over 30% of their bookings through OTAs, with individual property shares ranging from near zero to over 90%. Dynamics vary by region and product segment — for instance, major airlines typically maintain a higher direct booking share than lodging suppliers.
3. Where do you see the biggest pain points in current payment processing for online travel agencies, and what solutions are agencies actively seeking
The hundreds of different payments use-cases and process variants that need to be designed, built, maintained, and continuously monitored and improved make OTA payments vastly more complex than other e-commerce industries. For example, managing partial refunds across multi-leg itineraries or reconciling split payments between OTAs and supplier accounts can be disproportionately complex compared to standard e-commerce flows.
4. What percentage of revenue or transaction volume could a payment processor realistically capture if they entered this space?
For large OTAs who have billions of dollars of card processing volume, card acquiring has become a commodity (commercially – not technically).
Thus, few PSPs (payment service providers) can generate a good gross margin from this service alone. This is true for the biggest travel supply and demand geographies and for what has become the primary B2B payout solution in this industry: virtual cards (VCs). While VCs have achieved massive scale today, there is little margin opportunity for VC issuers working with large OTAs.
However, these high-volume, low-margin services are an effective foot in the door. The real margin potential lies in lower-volume, complex use cases that are costly for OTAs to build and maintain, or in specialized solutions that deliver performance difficult for OTAs to replicate in-house.
5. From the OTA perspective, what are the most critical payment features they need to compete effectively?
- Scalability and resilience: Payments are the backbone of any large OTA. PSPs must handle pay-ins and payouts reliably at scale and detect and address minor degradations instantly.
- Flexibility: Large OTAs typically use robust in-house orchestration platforms to assemble best-of-breed capabilities for each use case. They rarely source end-to-end solutions, so PSP offerings need to be modular and easy to integrate (e.g., Know your Customer [KYC], tokenization, stored-value wallets, etc.).
- Travel-specific expertise: Payments teams at large OTAs have deep in-house knowledge of their needs and constraints, but there are ample niche problems to solve. They value PSP partners who bring competent “outside-in” travel perspectives and solve those complex problems.
Strong fraud protection, international capabilities, and a competitive core offering are assumed table stakes.
6. From the hotel and airline partner perspective, what payment processing improvements would most impact their relationship with travel agencies?
There are millions of lodging, airline, car rental, and other types of partners across the globe, so needs and preferences can vary dramatically.
For smaller suppliers, when an OTA handles the complicated payment with customers from around the globe (either through the payfac or merchant model) by itself is one of the key value propositions of the OTA and a reason why these business models have seen relatively stronger growth than agency models. It’s a “better together” solution. The ability for PSPs to support and further improve these business models is key.
For large suppliers, including B2B distribution partners of OTAs, there is a trend toward customized payment solutions to meet the needs of both sides. This might range from more customized payment terms to custom payments data-sharing and reconciliation solutions.
Lastly, as the travel industry is always in the crosshairs of fraudsters, OTAs and their PSP partners need to leverage their respective advantages to protect themselves and travel suppliers.
7. How do commission structures and payment timing between agencies and suppliers create opportunities for innovative payment solutions?
Commission and margin structures for OTAs have eroded, especially in the 2010s. This is partly offset through new value-add services, like Virtual Cards, which offer suppliers tangible benefits while allowing OTAs to reduce margins on core agency services.
Payment timing is also an area of experimentation — both on the pay-in and pay-out side, particularly under merchant and payfac models. Large OTAs have tested accelerated payouts (often for a fee) and even lending or cash-advance products to support suppliers’ cash flow needs, especially in lodging, where seasonality is significant.
These financial products are not yet deployed on a large scale but represent future opportunities, as long as OTAs can justify the added complexity with clear value.
8. What emerging technologies are starting to reshape how travel agencies handle payments?
BNPL (buy now, pay later) products entered the OTA space over five years ago, and the industry has since seen steady learning, optimization, and growth.
There are opportunities on the consumer and supplier sides, with large and mid-sized OTAs building expertise and exploring partnerships with fintech and Insurtech players. Not every experiment succeeds, but the travel sector offers many niche use cases where the right fintech product can gain real traction and grow.
9. If a payment company wanted to enter this space, should they focus on serving the agencies themselves or their supplier partners first, and why?
For new entrants, it’s best to start on the OTA side. OTAs have large, concentrated payment volumes, dedicated teams, and clear pain points — so if a PSP or fintech can offer a superior product or economics, it can scale its footprint quickly.
That said, supplier-side solutions can be highly strategic, especially in lodging, where many partners face real friction with settlement, reconciliation, and cash flow. And many mid-size suppliers are not as technologically or operationally sophisticated, so solutions that simplify or improve their payment experience tend to be somewhat lower-hanging fruit.
As the travel industry evolves, payment innovation will prove critical to competitive advantage. Falk’s insights underscore that success requires more than processing volume — it demands travel-specific expertise, modular flexibility, and solutions for genuinely complex problems. Whether through virtual cards, embedded finance, or supplier cash-flow products, opportunities abound for payment providers who understand that in travel, complexity itself creates the greatest openings for differentiation and value creation.
