Blockchain has the potential to become “the final evolution of the Internet”, and its applications in the travel industry bear great promise of more secure, cost-effective and frictionless systems.
While there’s a great deal of uncertainty and scepticism surrounding the disruption, recent happenings in the travel industry and beyond make apparent that it is worthwhile to start taking the technology seriously early on, rather than broad-brush it as a myth perpetuated by anti-establishment crackpots or initial coin offering (ICO) scam artists.
Unpacking the jitters
The cryptocurrency market has seen extreme fluctuations that Morgan Stanley earlier in the year said mirrored movements preceding the dotcom crash, only 15 times faster. Bitcoin traded at an all-time high of nearly US$20,000 per coin in December 2017, before tumbling to under US$7,000 in February 2018. After it peaked, trade volumes rose almost 300 per cent, which analysts said was indicative not of investor activity but a rush to get out.
This year has also seen an ICO explosion with ponzi schemes in the mix, such as Oncecoin, reported to have taken investors for millions.Governments such as China and Japan are stepping up scrutiny of digital-asset trading, prompting a flight of some the world’s major crypto-exchange operators out of Asia.
However, it is important to note that blockchain is not Oncecoin, Bitcoin, or even the aggregate of all major digital currencies, but the technology that powers them and potentially a multitude of other functional systems and applications.
“The recent concerns about blockchain are really concerns about the launch of highly speculative cryptocurrencies traded as investment vehicles. Rezchain (launched by Webjet to eliminate invoicing disputes) is solving a business problem, and just happens to use blockchain as its underlying technology platform,” said Daryl Lee, CEO of WebBeds Asia Pacific.
Fabian Bartnick, TravelKoin’s head of strategic partnerships, stressed that many digital tokens are being traded, but ones likely to prevail are those that address problems.
Though a subject of scepticism, blockchain was born out of a distrust of “traditional” financial institutions. It has its value anchored in the supposed transparency, traceability and autonomy of data recorded in a decentralised network.
“This is a system that is totally public, secure and irrefutable. To (alter data on the chain) you’d have to go to every computer and reverse the encryption, which will take forever,” said Wong Toon King, a Singaporean Internet pioneer, chairman of Wegogo and managing partner of FarSight Capital.
Making ripples in travel
A look at more targeted applications of blockchain pulls the focus back onto the enabling aspects of the technology and the examples are numerous in the travel industry:
• Invoicing disputes
Invoicing disputes are a “significant issue” in the travel industry, WebBeds’ Lee said, and the associated costs “inhibitive”, especially in the face of intensifying competition.
Webjet developed Rezchain to eliminate such disputes, with Lee noting a success rate of nearly 90 per cent since the technology rollout.
“In our experiences, payment disputes in our hotel distribution marketplace can be difficult to resolve as buyers and sellers rely on the data contained within their own systems which will usually only interact together at the time of booking. Any discrepancies or problems between the booking systems often won’t surface until after the transaction has been fulfilled (i.e. the guest checks out of the hotel) which has a downstream impact to reservations and finance teams,” Lee shared.
With Rezchain, systems can pick up on disputes and alert the relevant company as the transaction occurs, allowing disputes to be dealt with instantly, Lee explained.
• Cross-border payments
“Travel is very right for blockchain because it is naturally cross-border and involves multiple currencies. If people can use digital currencies and stay on it, they can save a lot,” said Wegogo’s Wong.
“(Currently) it takes three to five working days to do an interbank transfer. You go through 11 intermediaries and everyone is taking a cut to facilitate the transaction. Banks also take a foreign currency cut, which can be up to seven per cent.”
For DMCs, which deal with many payment layers, the siphoning effect is even more severe, said Sandor Levai, CEO of ICS Travel Group, an early integration partner of TravelKoin.
Frictional costs also come into play. “(Some banks charge) a flat fee of US$80-100 per transaction, so we have to wait until we (get bulk) so it makes more sense to pay the bank fee than to fly (to another country) to deliver payment,” Levai said.
Transactions can take up to five days to process, he added, unlike TravelKoin’s near instant solution.
• Financial inclusion and rewarding small businesses
When it comes to certain countries, “sometimes payment doesn’t arrive or gets blocked”, Levai remarked. Take for example Myanmar, “a politically incorrect country… for a lot of banks”, but in the travel industry represents a big emerging destination.
And for Wegogo, which aims to connect small activity providers often left out of large travel marketplaces, digital tokens can help do the job. Wegogo users earn WeGold, launched in an ICO last month after a trial run, in exchange for recommending travel activities in South-east Asian island destinations.
Activity providers that “strengthen partnerships within the Wegogo ecosystem, deliver aspirational services and promote the platform” are also rewarded with WeGold.
Transactions and incentives are captured on the Blockchain, allowing for a “fair-share” ecosystem that builds trust and confidence among users, Wegogo stated.
Trade uptake and the road ahead
Some experts see signs that blockchain is moving beyond the proof of concept era. The Global Trade Review highlighted the “widely-held view that 2018 will be the year blockchain takes root commercially” after numerous trade and non-trade programmes demonstrated the technology’s functionality last year.
For Rezchain, this appears to be the case. It was piloted by Webjet with its internal hotel distribution brands in 2016, and in February 2018 was rolled out to four major travel partners in Europe (Thomas Cook) and Asia (DidaTravel, MG Group and Far East Hospitality).
However, it remains to be seen if the initiatives that involve digital currency are met with the same enthusiasm. While acknowledging problems and inefficiencies with existing B2B payments, travel players interviewed are not swayed by digital currencies, with volatility still a big concern.
“We foresee some potential to possibly integrate (cryptocurrency), but not in the near future,” said Niels Steeman, group director marketing and e-commerce, Asian Trails, pointing to the variances and volatility cryptocurrencies bring. “It also depends on our B2B customers, whether they see the need to pay us in cryptocurrency, and this has not yet reached our company.”
With trepidation over digital currency fluctuations as well as technology inertia within the travel trade, many blockchain champions in travel remain in the proof-of-concept stage, TravelKoin’s Bartnick admitted, while addressing anxiety through means such as stabilising mechanisms (which arguably are another concept to prove).
“Every startup has to get over a hump, but it’s only as big as its limitations of value creation,” Bartnick said. If transacting in the digital currency requires a simple click of a button, and results in thousands in savings, “then the value creation is already bigger than the hump”.
Until digital travel tokens find enough takers for the benefits to be realised, good news for blockchain initiatives come in the form of trader-investors. “Traders love volatility. A lot of attention is going to be in crypto because they can make money,” Wong said.
Moreover, Wong expects volatility would taper off over time.“When you’re pouring water into an empty pail, it (is bound to) slosh. The whole market cap for alt coin is US$450 billion. It’s tiny – that’s why there’s this great volatility. But as different crypto tokens become used in the economy and the pail fills up, it’ll solve this liquidity issue.”
