: Why online-travel giant Booking is getting into the fintech game

United States

Add Booking Holdings Inc. to the list of e-commerce companies betting that a tighter control over the payments process will create a better experience for consumers—and a new revenue stream.

The online-travel company announced earlier this month that it was launching a financial technology unit that would aim to simplify some of the monetary hurdles of international travel, from booking a room at a hotel where there’s a different local currency to making a purchase commitment for a trip that won’t take place for a few months.

Fintech represents “the last great mountain” for Booking BKNG, -1.14% to conquer as it aims to cut the “friction” out of booking overseas trips, said Daniel Marovitz, a senior vice president who will be leading the new group at the company, which houses brands like Booking.com, Kayak, and Priceline.

After initially operating in an “agency” model in which hotels would take the payments for rooms booked by customers, Booking has spent the past few years trying to get involved in the payment flow itself. Last year, 22% of bookings went through the company’s own payments platform, compared with less than 4% in 2017, and Marovitz expects continued growth going forward.

Chief Financial Officer David Goulden said at a March investor conference that Booking’s payments platform was “no longer a drag on profitability” and helped the company in its efforts to connect more elements of particular trip so that consumers could pay one provider for different parts of their travel.

Booking already offers a way for its supply partners, like hotels, to expand the payment options they offer to consumers. A hotel in Kansas may not want to go through the work of setting up Alipay acceptance on its own to better cater to Chinese travelers, for example, but Booking has done work on the back end to enable its suppliers to offer such local-wallet payment options without its partners having to manage them all individually. U.S.-based suppliers still ultimately receive their payments in U.S. dollars.

The company sees revenue opportunities in enhancing the payment experience through a variety of options for suppliers. “We want to make the pricing incredibly competitive because we’re doing it at great scale,” Marovitz said

Booking’s “goal over time is to offer a diverse menu of services in the fintech space,” he told MarketWatch. The company would explicitly charge for some of these services, and suppliers would get flexibility over which “suite” of offerings best meets their needs.

Future areas of exploration for the fintech group include buy-now pay-later options and foreign-exchange benefits. Booking is running a “pretty small-scale” pilot with buy-now pay-later functions that let people spread out payments through installments.

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Marovitz said that while the company has built out a lot of its own fintech infrastructure in its general efforts to involve itself more in the payments process, it’s also open to partnerships that can help the company take on functions more efficiently.

In terms of foreign-exchange, Marovitz is intrigued by ways that Booking can serve travelers from emerging markets with volatile local currencies. When people travel, they may make commitments to pay for trips that won’t take place for several months and they’re usually buying the trips in the currency of the hotel. “Four months from today, the trip could be 25% more expensive” for someone coming from an area with a volatile currency, Marovitz explained.

Fintech is a hot area for e-commerce companies, and Booking isn’t the only online-shopping player seeking a deeper involvement in the world of payments. EBay Inc. EBAY, +0.06% is several years into its managed-payments initiative, which also seeks to provide more local-wallet options that the company says create a better shopping experience for international buyers. Shopify Inc. SHOP, +0.08%, which helps businesses build online shops, has also made big bets on payments and recently launched an installment-pay offering in partnership with Affirm Holdings Inc. AFRM, +0.09%

Booking argues that its intersection with payments is among the most complex in the world of online selling because of the global nature of travel. “Even big global e-commerce brands tend to be quite local,” Marovitz said, giving the example of Amazon.com Inc. AMZN, -1.59%, which runs a U.S. site that sells goods in U.S. dollars primarily from U.S. merchants or overseas merchants that present themselves as U.S. merchants. Booking offers products in 210 countries and territories and “every possible currency pair you could imagine shows up in our business,” he continued.

The company has set out to have more than 400 employees in the fintech unit by the end of the year. While Marovitz didn’t give a specific count for the total number of employees currently working on such efforts, he said that the team was “growing into” the 400-plus target with an engineering-heavy focus and strong demand for designers, copywriters, and engineers.