Article

Asena Atilla Saunders
Asena Atilla Saunders 4 October 2018

How is Blockchain Technology going to Transform the Travel Industry?

Even though the conceptual baselines of Blockchain technology were first acquired in the 90's; Blockchain is recently the new hot topic; already has grown from underground communities and starting to reshape all industries. Leveraging Blockchain technology will provide industries convenience, will reduce their costs, and improve customer satisfaction to name a few. As one of the biggest industries that have access to various kinds of data from multiple sources; how can the travel industry -especially aviation- benefit from Blockchain technology?

Even though the conceptual baselines of Blockchain technology were first acquired in the 90's; Blockchain is recently the new hot topic; already has grown from underground communities and starting to reshape all industries. Leveraging Blockchain technology will provide industries convenience, will reduce their costs, and improve customer satisfaction to name a few. As one of the biggest industries that have access to various kinds of data from multiple sources; how can the travel industry -especially aviation-  benefit from Blockchain technology?

Main Problems of the Travel Industry

Centralised System

The highly-concentrated nature of the travel industry -run by ‘big guys’ that have most of the market power- hasn’t been creating an atmosphere for innovative solutions and has been setting high barriers for new platforms for years.

This centralised state of the industry adds extra costs to customers- and the industry itself- with high distribution, transaction and settlement fees, and commissions between the involved parties. Well, that is problem #1.

Data Management: Too Many Service Providers, Too Many Processes to Handle

The travel industry has many contributors such as Airline Companies, Hotels, Car Rental Companies, Travel Agencies, Tour Operators, Ground Services, Security Services etc. And all of them are involved with reservation details, travel/accommodation arrangements, customer information, cancellations, loyalty programmes and security within their own systems as well as interacting with each others’ systems.

Just to give you an idea; let’s take a look at some information that airlines track about their customers;

  • Departure & Arrival date and time

  • Destination & Departure city

  • Search & Purchase history

  • Credit card points earned

  • Miles/loyalty points used

  • Cancellations

  • Luggage

  • In-flight sales/ duty-free spend and meal choices

  • Rental car and hotel connections

To name a few. And don’t forget, this is just the customer information of the airlines! The remaining contributors also hold, process, track and share similar data as well as settling payments among themselves. So another significant problem the industry faces is data management among all the service providers.

 

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A very simple daily life example of the problems in data management and distribution would be: inflexible airline tickets. Since the rules of ticketing haven’t been changed for decades; we all know that it is not possible to change the ticket holder’s name or cancel our flights without either incurring extra costs or losing money.

Security Vulnerability

Data protection and preserving the brand trust in today’s digital world is crucial. Because the travel industry is centralized and its ecosystem has many service providers and 3rd parties collecting and sharing customer, employee, or inhouse data; it is inevitable for the industry having security breaches in the current technology. In fact in May 2018, the digital security company Dashlane has tested how secure the passwords of 55 airline websites were and declared that only 6 of the 55 airlines scored a perfect ranking where most of the airlines received an average score.

And we have also seen one of the biggest travel companies Sabre being hacked in 2017 which was quite surprising for the industry.

Billing, Settlement and Payment Problems

In the current system, billing settlements between airlines and agencies are managed by the 3rd parties that do not disclose the exact amount of their margins- which doesn’t come across as trustworthy. And when the purchase is made internationally, it gets more complicated.

For instance; any airline ticket can be sold anywhere in the world; through any agency. And the money transaction at this point is a pain in the neck. The transaction process starts with the passenger, and then respectively transfers to the agency, to the airline, and passes through payment gateways, credit card networks and international borders along the way.

This process takes between 15 to 45 days, and that’s not the only drawback. Just to give you an idea; the costs that airlines undertake to use these systems are*;

  • Application fees (~$100-$1,000)

  • Participation deposits (~$5,000)

  • Membership fees (~$225 per month)

  • Annual fees (~0.03% + $20,000 for billings over $20 million)

*https://airlinesclearinghouse.com/net-settlement/

It is very clear that the current technology (that is still based on a 40-year-old system) can meet neither the customers’ nor the organisations’ needs in the travel industry.

Enters Blockchain Technology

As mentioned before; blockchain is not an unknown area only about cryptocurrencies; it is an amazing technology that allows easy and instant collaboration between different parties in any industry.

Luckily there are some initiatives aiming to disrupt the travel- especially aviation- industry with a blockchain-based solutions such as Further Network who aims to provide a solution to Airlines, Agencies, Hotels and travel service providers to solve their Billing, Settlement, and Payment (BSP) issues while removing the 3rd parties and completing BSP in real-time; Winding Tree: a decentralized travel platform that minimizes transaction costs between suppliers and end users and Fizzy a blockchain platform that promises customers instant and conflict-free refunds on airline delays longer than two hours.

What will be the Benefits of Blockchain for the Travel Industry?

Decentralised Process: Decentralised real-time process; will reduce the waiting time and the security deposits that agencies are facing in the current system. From the travellers’ side, by tokenizing the tickets; the will also allow customers to customise their flight tickets or even change and sell them.

Reduced Operational Costs: As the settlements and transactions are done autonomously by eliminating the 3rd parties; the effort spent will be significantly reduced. As a matter of fact; this means a minimum of a 40% increase in profits of the airlines. Needless to say; travellers will also benefit from the cost reduction.

Reduced Disputes: The settlement process between multiple parties is error-prone and it causes disputes which also costs time and money for the organisations. Blockchain technology will reduce the number of disputes and allow a better resolution time. In addition to this; Crypto payments will allow the parties to protect themselves in the sensitive economic regions.

Security: Blockchain technology provides a less risky technology when it comes to storing and sharing data since it is highly resilient to hacking. Thanks to its shared ledger system, it offers a closed decentralised cloud system for a secure data management.

Open Network Standards and P2P Exchange Market: When all of the contributors in the market and stakeholders use blockchain technology; this will enable them to build their own technology and enhance their systems.

It is now the time to realise Blockchain is inevitable. With its tremendous potential and promising future, we should realise that it will be the technology of the future.

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