How fintech & travel firms embrace surge in TNPL loans?, ET TravelWorld

As Robert Louis Stevenson puts it, “For my part, I travel not to go anywhere, but to go. I travel for travel’s sake. The great affair is to move; to feel the needs and hitches of our life more nearly; to come, like Columbus, to a new world, and to feel ourselves more fully alive.” Millennials and Gen Z are two generations that are known for their love of travel, but they are also known for their financial struggles. Many millennials and Gen Z’s have student loans, high housing costs, and other financial obligations that make it difficult to save up for travel.

Basis few independent reports by online travel aggregators and travel companies, Indian travellers took an average of 2.9 vacations in 2023, up from 2.5 vacations in 2022. Additionally, the average per-trip spending of Indian travellers increased up to 20 percent in 2023 compared to previous years.

Key global & domestic TNPL insights
Basis a survey by Expedia, 44 per cent of millennials and 49 per cent of Gen Z’s are interested in travel financing options, such as ‘Travel Now Pay Later’ loans. These generations are more likely to prioritize experiences over material possessions, and they see travel as an important part of their lives. However, they may not have the financial means to pay for it all upfront.

TNPL loans, also known as Travel Now Pay Later loans, offer individuals the flexibility to spread out their travel expenses over time, making vacations more affordable and easy to plan. According to noted research, the global travel now-pay-later market is projected to exceed USD 103.5 billion by 2032, indicating that this financing option is gaining traction worldwide.

In India, the trend of utilizing personal loans for vacations is on the rise, with one in five individuals opting for this financing option, as per a 2023 survey by Paisabazaar. Furthermore, a significant portion of borrowers hails from non-metro cities, indicating the democratization of travel financing across metro and non-metro regions.

Among those who availed of holiday loans, a majority were salaried individuals, underlining the role of steady income streams in facilitating travel aspirations. With 74 per cent of borrowers belonging to the salaried category, it’s evident that TNPL loans are catering to the diverse needs of the workforce, enabling them to plan vacations without financial strain.

The collaborative evolution of TNPL financing
In light of the trends discussed, fintech companies are stepping up to meet the growing demand for TNPL loans, leveraging technology to streamline the borrowing process. Through user-friendly platforms, digital tools, and inventive lending plans, borrowers can easily apply for and manage their travel loans, enhancing accessibility.

By offering TNPL loans, fintechs are developing lasting relationships with new-age clients, who often see travel financing as part of their broader financial journey. By providing additional services like savings accounts and investment options, fintechs are deepening trust and increase customer lifetime value. Additionally, by diversifying their repayment options, both fintech firms and travel agencies are onboarding a broader customer base, including budget-conscious travelers and families, who may otherwise hesitate to commit to costly travel expenses upfront.

Moreover, from the business point of view, TNPL loans can provide fintech companies with an opportunity to diversify their revenue streams, thereby reducing dependency on a single market. It not only helps in mitigating risks in the long term but also enhances overall financial stability.

Beyond TNPL offerings, these applicants can serve as leads for additional offerings such as travel insurance, foreign currency exchange, or even travel-related credit cards. The integrated approach not only enhances customer value but also increases the scope for revenue generation.

Additionally, fintech firms are collaborating with various travel agencies to offer integrated solutions for various travel bookings while availing TNPL financing. By encouraging higher conversion rates and reducing booking abandonment, TNPL schemes contribute to increased travel companies’ sales volumes and revenue streams. Such partnerships can also lead to joint marketing efforts and co-branded promotions, further boosting brand visibility and customer acquisition.

Exploring dynamics of key TNPL payment plans
Personal loans for holidays are a convenient financial solution for individuals seeking to finance their vacation or travel expenses. These loans, typically unsecured, allow borrowers to borrow a specific amount of money and repay it over a fixed period through monthly installments. However, it is crucial for borrowers to compare offers from different lenders, considering factors such as interest rates, fees, and repayment terms, to select the most suitable loan option for their financial circumstances.

Presently, the TNPL market is segmented into three primary categories based on payment plans: installment plans, deferred payments, and other customized schemes. According to a research, the installment plan category is expected to dominate the TNPL market.

Installment plans, as the name suggests, allow customers to spread out their expenses over time by paying in regular installments rather than in a single lump sum. This financial arrangement provides travelers with greater affordability and flexibility. Whether booking flights, accommodations, or tour packages, customers can enjoy the freedom to plan and pay for their travel experiences at their own pace without the burden of immediate full payment.

In contrast, deferred payment plans require customers to make an upfront deposit and defer the remaining balance to a future date. While this option may appeal to some travelers who prefer to secure their bookings in advance and pay later, it typically involves stricter terms and conditions compared to installment plans. Nonetheless, deferred payment plans remain viable for those seeking to manage their cash flow while securing their travel arrangements well in advance.

While concluding, I would like to say that as the summer holiday season of 2024 unfolds, the augmenting synergy between fintech and travel companies is slated to redefine the universe of travel financing. The increase in TNPL loans reflects a growing desire among consumers to prioritize experiences over possessions, embracing travel as a means of enrichment and rejuvenation.

The author is the CEO of CASHe, Mumbai-based credit-led financial wellness platform.

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