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The verdict is still out on whether sparing people from having to pay for travel in a lump sum or via their credit card is enough of a problem to justify a business. (Investors may question whether this is “a feature or a product.”)
These startups bring up a fair point, though. While installment plans are common in many countries (especially in Latin America) for paying travel, the concept is almost unheard of in the U.S., Europe, and South Africa. In the U.S., a recent study by the consultancy Atmosphere Research Group claims that 41 percent of travelers surveyed expressed an interest in using installment payments for trips that cost $2,000 or more.
So, not surprisingly, major travel brands, such as Expedia and Golden Nugget, have begun testing these services.
Here’s a look at five of these companies:
Affirm is not a travel startup. It’s strictly fintech, and its signature product is enabling installment payments for a variety of products. But the company is worth noting here because, starting in summer 2016, Expedia installed Affirm’s solution and offered layaway plans for hotel bookings over $200 made on its U.S. Expedia.com site.
Find this feature by selecting a flight and hotel package and then selecting the “Monthly Payments” tab. Consumers can pay over three, six or 12 months using a bank transfer, check, or debit card, with annualized percentage rates ranging from 10 percent to 30 percent.
On a recent flight-plus-hotel booking totaling $1,018, Expedia and Affirm offered the option to pay as little as $92 per month on a 15 percent annual percentage interest rate for one year. The experiment is ongoing, and Expedia Inc. may expand it to its other brands.
>>Skift Take: As Expedia goes, so goes the travel industry. Suppliers (airlines and hotel chains) and other travel search companies and agencies, large and small, online and offline, will be watching.
UpLift is a fintech company that focuses on helping travel brands provide installment plan products to their customers.
Since November 2016, United’s vacation package program, operated by Mark Travel, has used UpLift’s software to enable customers to pay a deposit of typically $200 or $300 and delay paying the rest until 45 days prior to departure.
Unlike its rivals, UpLift charges no late fees, and it avoids credit-check hits, holds, and penalties. It relies on a model of fixed payments with interest rates like a recent 5 percent annualized percentage rate that Skift noticed in a test.
>>Skift Take: This Sunnyvale, California-based startup has some street cred. Investors include IDG Ventures, PAR Capital, and Thayer Ventures, which have helped it raise $8 million in funding. UpLift was founded by Brian Barth and Stu Kelly, co-founders of SideStep, a brand that more-or-less invented the travel metasearch business and was acquired by Kayak in 2007 for $200 million. Its twist is that it enables travelers to use partner airline and hotel co-brand credit cards to do the purchasing, which has marketing potential.
Airfordable was founded a year ago in Chicago, and we’ve mentioned it before. This graduate of the YCombinator incubator has developed risk assessment software as an alternative to doing credit checks, making the process more efficient.
It also keeps costs down, charging between 10 and 20 percent of the ticket price as a fee. It says it has served 80,000 travelers in its first year.
Airfordable’s wrinkle is that it works with almost any travel company. Consumers take a screenshot of their booking with a handful of the most popular travel providers, such as Priceline, Expedia, and Google Flights, and then buy the protection insurance from it.
>>Skift Take: Co-founders Ama Marfo and Emmanuel Buah have business track records that suggest they know how to get a company off the ground.
Flyr is a company included as one of Skift’s Top Travel Startups to Watch in 2017. It is no longer a “fare lock” company and has moved on from its original product to release other solutions. Since last month, it has been offering the ability to pay in installments at 0 percent annual percent rate interest and without a credit check.
Flyer’s differentiator is to offer an installment plan where its airfare-prediction algorithms predict that the fare is going to go down. It will make a booking at an optimum point and gamble that it can profit from the additional margin. The margin would offset the cost of offering the installment plan for free and without a credit check.
>>Skift Take: Backed by JetBlue Technology Ventures, Flyr is being closely watched by many airlines. If its TripPay and Travel Finance layaway products are successful, suppliers may hire it and other companies to provide back-end, white-labeled vendor technology for the sale of tickets on their channels.
FomoTravel, or Fear of Missing Out Travel, is a South African installment plan startup by Andrew Katzwinkel. It received a seed funding round earlier this month from The Singer Group, owner of travel agencies like Amazing Holidays. Fomo Travel offers a B2B/B2C payment solution to facilitate the buying and selling of packages.
Its enticement is what it calls a “social savings lay-by model.” It requires recurring monthly payments, but it lets users invite friends and family to contribute to those payments. If a customer shares their trip on social media, the payment process changes.
>>Skift Take: Fomo Travel has a few built-in methods for viral marketing. Besides the social sharing incentives, it acts as an affiliate service for tour operators and doesn’t operate as a travel agency itself. The Singer Group minority investment should give it access to more customers via partner agencies like XL Embassy Travel.
Given the need for installment plans for the sizable number of South Africans who are cash-strapped, the company has a substantial market to tackle. It is unique in offering layaway plans for “experiences” like Safari tours and multi-day package tours overseas.
For all of our startup coverage, check out our SkiftSeedlings archives, here.