Will Blockchain Revolutionize the Travel Industry?
The hype for cryptocurrency has reached a fever pitch. While investors try to guess the rise and fall of bitcoin, we believe the underlying blockchain technology is far more important and will be more impactful worldwide, across all industries, than cryptocurrency alone. Let’s take a look at the areas where Blockchain could transform travel:
As identity thieves and database hackers prey on a rapidly digitizing world, now, more than ever, it’s critical to ensure that identity verification in travel transactions is efficient, accurate and secure. Blockchain could offer a solution by securely storing sensitive information, such as biometric data. This could have huge implications for managing identity, including confirming ID’s at national borders. On the world stage today, the undisputed leader in blockchain-powered identity solutions is the country of Estonia, which already provides its citizens with digital IDs to access government services and travel within the EU.
Blockchain could make it easier for consumers to securely share information with travel businesses, too. We interviewed Trond Vidar Bjorøy, head of product development and implementation at ATPI Group, a global travel management provider, and he explains: “With blockchain, you could have one ID for airlines or your travel management company, with all your travel preferences, payment methods and contact details. The key is, you decide who can access your identity and personal information, and you can cut someone off if you no longer want them to have access to it.”
One startup making strides in this space is Civic, which allows users to store identity information in their phones and share specific, authenticated data with businesses that partner with the company. Some of Civic’s partners are in or relevant to the travel space, such as home and car rental sites, as well as the global travel distribution giant Amadeus.
2. Loyalty Programs
According to a recent report by Deloitte, one-fifth of loyalty program members never redeem their rewards. This isn’t just bad for consumers, it also impacts the loyalty providers. Unclaimed rewards count as liabilities on companies’ balance sheets, and program members who don’t redeem rewards are 2.7 times more likely to leave the program and join a different one.
Through blockchain, travel businesses can empower customers to make the most out of their points and miles, while reducing their own liabilities. Just as blockchain-powered solutions help financial transactions happen instantly, they can speed up rewards redemptions too. Moreover, when companies cooperate to join a single blockchain network, cross-redemptions — spending rewards from one brand’s loyalty program on products from a different brand — could become faster and easier.
Partners at the consulting firm Oliver Wyman, writing in Harvard Business Review, predict that between four to six blockchain-based loyalty networks will ultimately dominate the travel space. Loyyal is one example of a company attempting to build a blockchain-based multi-party loyalty platform.
3. Smart Contracts
Smart contracts could add yet another layer of efficiency to the way we travel. Smart contracts, which are stored on the blockchain and can be automatically executed once certain conditions are verified, could help devices and machines transact automatically with one another, potentially leading to far greater automation on the airfield and elsewhere. One company leading in this space is Filament, a JetBlue Technology Ventures portfolio company, which recently debuted a new chip that will allow connected industrial devices, shipping containers, and similar assets to securely interact with and transact against blockchains. We can imagine things like instant payment for service providers, leading to higher contract compliance and reduction of back office transactions.
4. Cross-Border Transactions
Global travel often includes a host of cross-border transactions, which are typically more expensive, complicated, and time-consuming than domestic transactions. Prominent startups that aim to improve cross-border transactions, via reducing intermediaries, are Stellar and Ripple. Stellar recently gained the support of Stripe, a company that handles digital transactions for more than 100,000 businesses in 25 countries. Ripple’s enterprise blockchain network, RippleNet, now counts more than 100 financial institutions as members, including, most recently, American Express and Santander.
Of course, the cross-border transactions will also benefit from cryptocurrencies, travelers and businesses avoid the fees and risks associated with exchanging currency. These transfers happen securely without an intermediary and can be completed in seconds. A select few prominent travel companies now accept Bitcoin, including Expedia. Meanwhile, three Caribbean tourist hotspots are working on their own digital currencies.
Much like cross-border transactions, business-to-business travel transactions are handled through intermediaries. When travel suppliers do business with travel agents and online travel agencies, they go through what are known as global distribution systems (“GDS”). These systems charge fees for access and services, which may prove prohibitive for travel startups, and add cost to the overall travel ecosystem for existing travel providers, which in turn increases costs for travelers. While current distribution systems provide value to both travel providers and travelers, blockchain could disrupt this entire space.
Through blockchain, it’s possible to create a digital marketplace that allows direct B2B transactions between travel businesses, reducing costs and improving efficiency. Such a marketplace could eventually be open to consumers as well, potentially allowing travelers to bypass agents. There is early experimentation in this space, with startups like Winding Tree, which is creating a business-to-business blockchain-based platform for air travel, and Lockchain that is developing a blockchain based hotel distribution platform. Established companies like European tour operator TUI, have created internal blockchain platforms to track hotel inventory.
The Hurdles and the Future
The best blockchain-based startups are still fighting for dominance, much as web companies did during the ’90s dot-com boom. It will take a few years for the new business models to emerge, but we believe now is the time to begin learning about and experimenting in this space.
Ultimately, scale will prove critical in determining success of these solutions. The bigger a blockchain network is, the more successful it can be. It’s unclear, however, how well businesses and other entities, such as governments and industry associations, will cooperate to form, as Craig Gottlieb, principal director of aerospace and defense at Accenture called it during our interview with him, a “coalition of the willing” to support blockchain networks.
For now, plenty of “willing” parties in the travel industry are eager to at least experiment with blockchain. Given all of the innovative blockchain-powered solutions in the works today, we’re confident that blockchain will one day make the travel industry more seamless, secure and efficient.