How Blockchain Could End Travel Industry Pain Points

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by: Trond Vidar Bjorøy, Corporate Travel Tech Enthusiast / Head of Product Development & Implementation Nordics, ATPI.

I was watching this panel hosted by Norm Rose from last year’s Travel Tech Con where Norm was asking the guests about pain points in travel and how blockchain could potentially solve them. I would like to explore further on that subject. Let us see which industry problems could be fixed through decentralization.

Overbooking

During her introduction on how the blockchain could help the travel industry, Tiana Laurence from Factom used the example of hotel overbookings to illustrate how blockchain could help prevent double-spend in the industry. While the blockchain could certainly technically help avoid UA3411-scenes, we know that this is very much part of a decades old strategy of suppliers, airlines in particular, to increase profits and optimize resources. So I am not convinced this is what’s going to drive widespread adoption in the industry, unless this common practice is made illegal.

Fraud

You cannot reverse a transaction that has already been made on the blockchain. If a payment has been made you cannot recall it. If the funds are there the payment will go through. You do not have to worry about chargebacks on credit cards. Fraudulent cases will be easier to spot and less likely to occur.

Blockchain could also ease the continuous process that is PCI DSS compliance, at least for TMCs and other incumbents. In a blockchain-enabled world where cardholder data is no longer stored in traveller profiles hosted in corporate databases, but belonging to the traveller and stored on the distributed network, along with the booking transactions – who does PCI apply for? Perhaps the companies that are going to develop the solutions that will let us store our sensitive data on the network. Let’s dig a little deeper into this.

Identity and reputation

A big part of the world’s population is excluded and disconnected from the global economy and society today. Decentralization through crypto-economies will enable billions of people to get access to basic financial services (check out the Token project), connecting them with the rest of the world. And to give everyone in the world the opportunity to travel, they need a means of proving their identity, an identity that is going to be impossible to forge or change. This will be provided through access to reputation based identity systems.

Even though there are identity systems in use for authentication today, like federated identity and social login, you cannot easily build upon them to pull in data from many sources, and use the attributes that you want when you want them, not unless you integrate with all of these parties. Decentralized identity systems are here to fix that.

These systems will let you store your identity on public networks. As the identity owner you control (or you might prefer to pay a third-party to act as custodian of your private key) who can access your identity and personal information, and can cut someone off if you no longer want them to have access to it. They will allow for one-time, contextual, ad-hoc uses of your attributes. Just as you can in today’s physical world, when you show your driver’s licence to prove that you are allowed to buy a drink, or your passport to enter another country. Check out the Sovrin Foundation who are building such a system.

Going to the airport, carrying or wearing an IoT-enabled device connected to the blockchain, and this device has been authenticated and known to belong to you, you too could be authenticated and checked in as you reached the airport, or your gate. Your ticket information could be stored along with your identity. As a trusted individual with a reputation guaranteed by the blockchain you could say goodbye to waiting in lines, TSA and obtrusive checking of personal details. Just walking through the airport and into the aircraft, even across borders. A long way from today’s congested airports.

Traveller Profiles

While blockchain is very much about moving values fast it is also about handling and securing data in better ways than today. In travel, user/traveller profile security and user privacy have always been hot topics. When a company enters into an agreement with a TMC, airline or other supplier, the company usually needs to give that supplier access to employee data, for them to be able to provide the expected service. Whether that process is manual or automated via system integration between the two, building a well-functioning profiling process takes time and effort and creates friction on both sides.

If employees had their information on the blockchain, this could remove much of that pain on both sides. You would not have to build new API connections between the supplier’s profile database and the buyer’s HR/ERP system for every new implementation. Any manual profile workflows would be history. There would be no need for employees to create user accounts with multiple suppliers, duplicating their information along with thousands of other users with the risk of data breaches that comes with that. Nor would they have to adopt every new supplier’s user interface. Just one unified profile available to those explicitly given access.

Settlement

Among the more obvious and certain improvements we will see from the blockchain is the ability to move money faster. Many fintech innovations will benefit us as well. The removal of middlemen and their fees, money transfers in real-time, instant settlement, streamlined and continuous auditing. We should see the effects of this in all steps of the payment flows and between all involved parties, including the settlement processes specific to the industry, i.e. BSP/ARC.

Loyalty

By now we have all heard about the promises of interoperable loyalty programs: Instant credit, exchanging points, transferring points between friends, receiving personal promotions, converting points into cryptocurrency. Buying a flight ticket with points that you earned from flying with a competing airline.

When travelling I am not a very loyal person. I just want to enjoy the best offers that I can at any time so this setup actually sounds perfect to me. Could this become a predicament for the loyalty program owners?

Will the blockchain actually be promoting disloyalty, and could it for the same reasons help tear down the walls we have been building around us all these years?

Will we see B2B2C models emerging, with participating businesses uniting forces to meet the rising expectations from travellers?

Policy and compliance

The TMCs today have the role as the gatekeepers who are there to help corporates drive compliance. Could the blockchain take over this responsibility? Imagine the company travel manager receiving real-time alerts for policy breaches as they are about to happen. Whenever an employee is trying to book a trip outside the correct channel, a direct two-way communication channel is set up between the travel manager and the, knowingly or not, disloyal employee.

Or perhaps we will see a paradigm shift in managed travel and booking behaviour. Remember open booking?

Perhaps the blockchain, with its potential for unmatched transparency, security and privacy, might finally be the enabler of this promised model for the future of managed travel?

Book where you want as long as it is within policy. Your travel data still gets collected, consolidated and made available to you, instantly. Whether that stays the TMCs’ role remains to be seen.

Duty of Care

Risk management systems could be granted access to travellers’ location at any time. The travel manager, looking at the map of her employees’ whereabouts would see this update whenever a new reservation gets created, modified or cancelled, and when a traveller boards the plane, checks in at the hotel or starts the rental car. Or perhaps the system does not use reservation details for traveller tracking, but instead receives real-time updates from an IoT-enabled device carried by the traveller. Health records stored on the network would aid the traveller in need of medical help.

Smart contracts

I have written about smart contracts in previous articles but this topic deserves more attention. What can these do for the industry? These transactions are executed in autonomous software code, not law. If we look at a legal contract or a business agreement, they are basically the same as code. A series of if-then-else statements. If you do this then I will agree to do that, if not I will do something else. An example (I have no idea if this scenario is rooted in reality or not but it serves the purpose):

Hotel A enters an agreement with TMC B with a clause saying that for the next six months, room nights booked more than 7 days in advance will give a higher commission than those booked later. With today’s model, both parties would sign a contract. When the period ends, both the TMC and hotel might have to run reports to identify the total number of qualified bookings from the TMC. Or they use some commission consolidation service to document it for them. Eventually, the correct commission amount gets paid out but this takes time and effort and there might be middlemen involved in the process as well, taking their piece of the pie.

In a smart contract for this agreement, we could program the legal and business rules associated with it.

So we would set up a rule that says, if upcoming stay booked through TMC B is in 7 days or more, then transfer .005 BTC from Hotel A to TMC B. Else, transfer .002 BTC. Again, we are in a blockchain-enabled world here and payments are direct and happening in real-time. And the only third-party possibly involved and entitled to a small transaction fee, would be a provider of the smart contract service.

There are obviously many benefits to this. Saved costs with the removal of intermediaries (lawyer, notary, broker etc), cutting hours off business processes and the trust achieved from storing your documents encrypted on a shared ledger.

For now it helps knowing how to code if you want to build smart contracts but there are visual editors that help write and deploy them for you and eventually tools will come that enable any business role to create contracts.

Silos

Will we see a predominance of permissioned/private blockchains in our industry as the big incumbents try to evolve and maintain their power? We are already good at closed ecosystems so this could be the next natural step in that direction. On the other hand, perhaps the very nature of the blockchain – the more open and public you keep it, the faster more nodes can connect to it, and the bigger, stronger and more secure your network gets – could actually be what this industry needs to really disrupt itself?

There are initiatives that seek to enable connectivity between different blockchains, building an internet of blockchains, so there is hope of seeing large-scale systems that open up for collaboration even if the industry should go down the route of private networks.

However, public versus private blockchains seems to be much like the internet versus corporate intranets. Both have its advantages and I hope that the industry will see useful applications on both. The established public blockchains, such as Bitcoin and Ethereum, however, have an advantage in scale over newer alternatives in terms of both payments and the applications that can be built on them. Newer and smaller blockchains on the other hand, will have an easier task achieving the network-wide consensus required to make strategic changes to the protocol.

I am hoping, although not yet fully convinced, that blockchain will revolutionize the industry. While it is no panacea we are undoubtedly going to benefit from disruptive financial solutions that will extend across industries, but beyond that I feel there is a lot more insecurity. The technology is entering the trough of disillusionment now and Gartner predicts 5-10 years for it to reach mass adoption. I would say for corporate travel it is a bit behind that and we are probably at least a decade away from anything close to an industry wide adoption of the blockchain, if it ever happens.

After all, we are talking about an industry where fax is an indispensable part of many business processes and where 40-year old tech dominates distribution.

However, one should not underestimate the fear of missing out, so if we just see a small percentage of companies beginning to move their services to the blockchain, this could see other players beginning to feel the pressure of the competition, and start moving themselves. Hopefully, more people will start to add value when they see the true potential beginning to unleash. Blockchain does not have a killer-app yet but it could take just one to drive widespread adoption.

Send in the startups

Either way, it will be startups leading the way.

Most incumbents in the industry have limited opportunity and willingness to invest in emerging technologies and I do not think we will see many of them drive innovation.

We might see some use blockchain to entrench their position though. This is happening in other industries where many blockchain consortia are being created, most of them in financial services but they are spreading to other sectors and industries.

Will we see the first blockchain consortium in travel in 2017? Perhaps between some of the biggest intermediaries, the GDS companies? Or even between GDSs and airlines?! I am probably dreaming… While it would be good for collaboration between otherwise competing players, I do not think the industry is ready. There are not incumbents who see enough incentive to collaborate and invest, at least not until they see new markets or feel forced to due to threats. At this point their attention is probably directed at more immediate attempts at disintermediating the distribution landscape, like GDS surcharges and NDC, and how to counter/monetize that.

This great image, used with the permission of Jeremy Epstein (visit his company website, Never Stop Marketing) shows some of the current value creation possibilities in the blockchain tech stack.

It is going to be interesting to see where travel companies will try to make a profit. One likely area is within the decentralized economy layer. There is an emerging token economy here, with the network creators issuing tokens, digital assets that they offer to network members (via Initial Coin Offerings – ICOs, similar to IPOs and crowdfunding, more on that in a later article, maybe). These tokens are used to create value which again is captured by the network owners – being the token holders as opposed to one central entity. One such network is La’Zooz (see previous articles for details). The network creators keep a percentage of these tokens for themselves and that is how they make money. We could see many distributed networks like this pop up across the industry. Volatility marks these projects though, as the value of these cryptocurrencies can have massive fluctuations from one day to another. There have been some great success stories and massive failures already.

Others will not be issuing tokens but try to make money in the application layer, building decentralized apps (dapps). These dapps that are built on top of the blockchain stack architecture, share data with all other apps that use the protocol. They work similarly to apps of today but instead of running on a single server they run across all devices that are running the blockchain. And being built on decentralized protocols, they are able to talk to each other, hence all this talk about interoperability. This fact has also labeled these apps volatile, as moving from one to another and bringing your assets with you can be done in seconds and without cost (imagine when you can move your bank accounts and insurances like this). So good UX will be crucial to keep your users. I have not seen any good travel dapp examples yet, except for the etherisc flight delay insurance demo that I mentioned in a previous article, but it is going to be extremely interesting to follow this development.

This shared data layer will also make it easier for new players to enter and should help create a more competitive ecosystem of products and services, something that the industry desperately needs. Incumbents will be forced to cut costs and build better products.

I hope to dive deeper into some of these blockchain concepts and emerging disruptive business models in a future article, and see how we can apply them to our industry. I just need to get my head around it all first…

Trust

So what else could the blockchain help transform? In the video I linked to earlier, Norm mentions the many strange money flows in our industry.

A lot of people in the industry actually get paid to use certain technology… privately negotiated and opaque fees, overrides and commissions.

There is certainly a lack of trust in the industry, between the suppliers and the intermediaries. But in a world where you trust no one, you can trust the blockchain. It was designed to enable value exchange between parties who do not know or trust each other. It will make transactions more transparent and could significantly improve visibility and trust across business.

Even if the blockchain will be powering the whole travel process 10 years from now, as travellers we will not necessarily know it is the blockchain doing it. It will just be there, working invisibly in the background, streamlining and enhancing all processes. Much in the same way as most people have no idea how the internet works. Or email. And the majority will not care whether their product uses blockchain or not, as long as it works and does something they need or want.

It is still very early days – if we compare it to the development of the internet we are now around 1992. It is impossible to foresee all implications of this, not only technical but very much social ones as well.

Trond Vidar Bjorøy, Corporate Travel Tech Enthusiast / Head of Product Development & Implementation Nordics, ATPI

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