Payment Gateway

The payment gateway in the travel industry finds itself at the critical final stage in the booking funnel. When a traveler enters their credit card info into an IBE (Internet Booking Engine) or an OTA, the gateway instantly takes the following steps:

• Encryption: It encrypts the sensitive payment data (like the 16-digit card number and CVV) to ensure it can’t be intercepted.
• Transmission: This encrypted data is then sent to the Acquiring Bank (merchant’s bank).
• Authorization: The Acquiring Bank contacts the Card Issuing Bank (e.g., the traveler’s bank) to determine whether funds are available or not.
• Response: The gateway is notified of “Approved” or “Declined” and in return communicates back to the booking engine to accept or decline the booking.

Processing payments for travel is far more complicated than regular retail e-commerce because of the global and high-value transactions. A travel-centric payment gateway has to deal with:

• Multi-currency processing: The ability to accept payments in the customer’s local currency (e.g., yen) but settle to the supplier’s bank account in their local currency (e.g., euros).
• High-value transactions: Travel bookings tend to involve high-value transactions, and it is important to have strong fraud detection systems in place that do not result in false positives.
• Alternative payment methods (APMs): Credit cards are not the king of the world in many parts of the globe. Gateways have to support local methods such as Alipay (China), Pix (Brazil), or iDEAL (Netherlands), as well as BNPL (Buy Now, Pay Later) services such as Klarna.
• Tokenization: This is very important for hotels. Tokenization involves the replacement of card details with a secure token. This way, the hotel can use the card later to charge for “incidentals” (such as room service) or “no-show fees” without storing the real sensitive data on the card, keeping it secure.