Hidden charges levied by financial intermediaries mean travellers often face high charges for the privilege of paying in a currency they understand. New research from Amadeus suggests travellers begin to abandon bookings when FX fees reach 5% of the cost of a flight 14% of travellers say they have paid more than 10% of a flight’s total cost in FX fees, often resulting from opaque fees levied by financial intermediaries
When booking flights, 89% of travellers would be more likely to choose one airline over another if given the option to pay in their preferred currency, highlighting the importance attached to transparent pricing. However, a new study from Amadeus reveals that hidden charges often levied by financial intermediaries mean travellers can face high charges for the privilege of paying in a currency they understand.
More than a third of respondents have paid between 3-10% of the total cost of a flight to make the payment in their own currency, with 14% having been charged more than 10% of the total flight cost. The vast majority of travellers (76%) reported unexpected FX charges when purchasing a flight.
Using a dummy airline website, Amadeus worked with psychological research firm Innovationbubble to study travellers’ conscious and subconscious reactions to different levels of FX fees. According to the research, travellers begin to notice FX fees when they reach 3% of the total ticket price, with ‘alarm bells’ beginning to ring as the fee approaches the psychologically important threshold of 5%. However, the overall cost of the flight still remains the most important factor for securing a booking.
Bart Tompkins, Managing Director, Payments, Amadeus said, “Travellers want a transparent shopping experience with flight prices displayed in their currency of choice. Today the industry largely outsources currency conversion to financial intermediaries and our research shows this can lead to high fees that often exceed the threshold travellers consider reasonable.”
He continued: “Airlines now have an opportunity to become fintechs, bringing FX services in-house so they can set reasonable fees and deliver an improved digital shopping experience, with the choice and transparency travellers demand.”
According to the research, the majority (59%) of travellers would prefer their airline to handle the currency conversion rather than a bank, with 43% stating that bank levied fees are too high. In addition, travellers confirmed that on average they now trust airlines more than banks to handle FX transactions on their behalf.
Jamie Halliday, Strategic Customer Insights Director, Innovationbubble added, “Whilst the overall flight price and product attributes remain paramount, our research demonstrates that getting FX wrong can be a real turn-off for travellers. When the rate reached the 4-5% threshold, people’s alarm bells went off and they began to actively seek alternative travel options.”