Over the past few weeks, it’s been impossible to watch or read any financial news without being confronted by Bitcoin. At the time of writing, the world’s most famous cryptocurrency has seen a meteoric rise in value, up 161% ($10,567) in the last month alone. People are starting to take notice.
Whether or not you believe the whole cryptocurrency thing is a bubble or that something you can’t hold in your hand can’t possibly be worth that much, the technology is here to stay.
That technology is, essentially, blockchain. We’ve written recently on the potential that blockchain technology holds for the travel industry. Today we’re going to focus on the concept of a digital currency. How could this make travellers’ lives easier? How could travel companies benefit? And what developments are already underway in this space in the industry?
Could the travel industry’s early adopters of cryptocurrencies benefit in the long run?
If Bitcoin and its fellow digital alternatives are to move from the status of speculative vehicles to real-world game changers, they are going to need genuine use cases. As Bitcoin has grown more popular with investors, a few obvious weaknesses have come to the fore. These include the amount of sheer power needed to run the network and a lack of scalability options. This means that Bitcoin has moved beyond being a medium of everyday transaction, and is now more seen as a store of value: digital gold, if you will.
But blockchain, Bitcoin’s underlying technology, can be deployed in different ways – something proved by the various alternative cryptocurrencies gathering momentum in Bitcoin’s wake.
But let’s start with considering why travellers and travel businesses might choose to take a leap of faith into the unknown world of cryptocurrencies.
Speed, accessibility, savings and security
In a few short years, a technology could come to the fore that will release international travellers from the woes of currency exchanges, carrying large amounts of cash on hand, withdrawal fees and fraud. Decentralised ledgers, digital wallets and frictionless transactions could be the future. These are the founding tenets of cryptocurrency.
How Bitcoin and Alts could benefit travel companies and their customers
We know that Bitcoin is on the rise in terms of value, alongside other currencies such as Litecoin and Ether, the token used on the Ethereum blockchain platform. But importantly, we’re seeing this rise in value correspond with a rise in retailers and brands accepting cryptocurrencies as a form of payment.
As these digital currencies emerge as a genuine alternative to conventional banking and fiat currencies, their benefits are becoming accessible to ordinary people around the world.
One of those benefits is the ability to transfer money to another individual or company, without needing any kind of middleman. Bitcoin, Ether, Ripple, Litecoin: All can be sent between users without any banks or payment service providers charging a commission for the transaction. Having said that, a small fee is paid for every transaction to miners (or destroyed in the case of Ripple), whose computing power has to solve a complex puzzle in order to confirm new entries on the decentralised ledger.
So cryptocurrencies are not free, but to differing extents, all can move money around at a fraction of the price of conventional companies such as Paypal and Swift. They also tend to be faster, which goes some way to explaining why Ripple (XRP) is seen as Swift’s biggest competitor moving into 2018.
So that’s speed and fees covered.
What about security?
The whole point of cryptocurrencies is that they are founded on cryptography, puzzles that only computers can work out. Every transaction is also recorded on a decentralised ledger. There is no single point of weakness in the network, no vault that can be cracked. The mining community (or more accurately, their computers) confirm and record every transaction on the blockchain. Currency movements are recorded in hash functions with timestamps so that the data cannot be changed or tampered with.
It’s this reason that blockchain technology is offering all kinds of industries ways to enhance security and prevent fraud.
And finally, we come to accessibility. Did you know that a recent report from Mastercard found that over 130 million people in Europe have no access to traditional banking services? Sure, some of us take banks for granted, but that’s not the case for everyone.
On top of that, a lack of trust has developed between the public and the financial sector. Conventional banks are seen as profit-driven, not people-driven, and responsible for global economic problems. In that environment, the emergence of digital currency far from the reach of major institutions is attractive.
What does all of this mean for the travel industry?
Okay, we’re finally getting to the focus of this piece. How will cryptocurrency and all of its benefits impact the travel industry?
Established players in travel and tourism are already embracing the opportunities Bitcoin and alternative cryptos have to offer. Let’s take a look at some recent examples.
Although more blockchain than cryptocurrency, Fritz Joussen, CEO of industry giant TUI Group, recently outlined the firm’s belief that Blockchain technology would become a fundamental part of business in the next decade. He also revealed that the company has launched its own project based on the technology called BedSwap. The system allows TUI to move its hotel inventory to different points of sale depending on the demand.
And then there’s another industry heavyweight, Expedia.com. The OTA introduced the option for customers to make Bitcoin payments for hotel bookings halfway through 2014. It’s a matter of time before flights and other major purchases are also available to cryptocurrency holders.
Across the Pacific, Japan’s HIS Co Ltd recently announced compatibility with Bitcoin for payments. The company started by launching the payment option at 38 of its stores in Tokyo. The aim is to increase the number of participating outlets further. As part of the move, the company offered special bitcoin tour packages.
That’s a few examples of industry giants taking cryptos seriously. Smaller agencies are doing so, too. Take Malta’s Bitcoin Adventures. Originally set up to raise the profile of Bitcoin in Malta, the slightly strange company’s first customer was a Japanese tourist who arranged a three-night stay paying with cryptocurrency.
Thailand has had an up and down relationship with Bitcoin, banning it in 2013 only to reverse the decision a year later. Plenty of the country’s tourist hubs have embraced the currency, including the Pattaya Beer Garden, which sees major benefits of accepting Bitcoin, including a lower risk of credit card fraud.
Another travel startup, UK-based TamTam Travels, has an interesting business model based on cryptocurrency and blockchain technology. The company’s membership portal offers discounts on benefits and services around the world.
As part of a pre-launch last year, the blockchain travel startup offered discounted packages on memberships, with additional rewards of its ‘native’ blockchain currency – called the JIO Token – for purchasing memberships.
TamTam Travels accepted a number of cryptocurrencies for its launch including Bitcoin, Dogecoin, Ether and Litecoin.
Our final example comes from TripAlly, a travel/tech startup using cryptocurrency to end the financial pain of international roaming. Instead of paying a fortune for local data, TripAlly aims to provide mobile internet without borders. How? The startup will provide their service as a mobile application that will allow you to access foreign mobile networks for data. Hooray.
But what has that got to do with cryptocurrencies? Well To raise funds to get the company off the ground, TripAlly held an ICO, an Initial Coin Offering; a crowdfunder with the cryptocurrency community. In return for donations, backers have received Ally tokens, which can be spent on the roaming service provided by the company.
Mainstream adoption in the travel industry is inevitable
In the past few weeks, cryptocurrency trading application CoinBase has been one of the most popular apps across Android and Apple download charts. This is not just because people are seeing cryptos as speculative vehicles. It’s also because the technology promises a new way of doing things.
With that in mind, it seems inevitable that cryptocurrencies will become a more common part of our day to day lives. Some of these digital currencies have been around for a while, too. Bitcoin came to light in 2009, yet it still comes as news to many. It’s been a slow journey, but Bitcoin and other Alts are gathering momentum.
The world of travel appears to be open to working with the concept of digital money. The blockchain technology at its foundation is already revolutionising all kinds of processes.
Mass adoption is on the horizon. So perhaps the travel industry’s early movers will reap the rewards when cryptocurrencies become the norm.