Ai Editorial: 5 Key Issues - Alternative Forms of Payments

Alternative payment methods are attractive, but don’t forget to assess key issues. There are specific challenges, be it for system integration or fraud management that airlines need to address as they go for alternative payment methods. Airline Information’s Ritesh Gupta assesses 5 key issues.

A seamless buying experience is one that offers a travel shopper convenience, ease of use, and security. And an integral part of such experience is the preferred mode of payment. Merchants are trying to simplify transactions, for example, eradicating the need for usernames and passwords each time one pays. The industry is moving toward single touch payment experience via apps. While a passenger may have plenty of choices today to complete a transaction, it also means that airlines can’t afford to slip of any new mode of payment.

For instance, consider the talk about Apple Pay transactions and a consumer wallet experience for native iOS apps. The buzz is unmistakable, and airlines need to swiftly assess how to remove the friction from the mobile buying experience. In fact, travel suppliers have to be prompt enough to inform consumers about any new payment, be it for value of electronic currency, bitcoin, or Apple Pay transactions.

During the 3rd edition of ATPS APAC 2014 conference, held recently in Singapore, it emerged that global e-transaction payment mix is evolving considerably in the airline sector. According to Linus Goh, business development director, Asia Pacific at WorldPay, spend on alternative payments and cards is expected to trade places by 2017. Alternative payment methods will account for 59% of all transactions by 2017!

Here we explore 5 key issues pertaining to alternative payment methods: 

  • Speed - every second counts: Smartphones are part of our lives and any mechanism that facilitates payment via such devices is of prime importance. “Increased used of affordable smartphones have made the life easier. People can decide and take action on their travel plans while on move. As such, mobile app is a boon to the consumer,” says Waqas Mohammad Riaz Hakim, Supervisor Web Support & Fraud Prevention, Gulf Air - Web Support & Fraud Prevention.

One of the major impacts of smartphones in the payment arena is speed with which can pay. The promise of completing a transaction in less than a minute has been around for a while. This is exerting pressure on airlines, hotels and intermediaries as no one can afford to drop their conversion rates.

In case of HotelQuickly, a mobile specialist intermediary based in Hong Kong, the processing time for a payment came down from 7 seconds to 3 seconds when the company switched over to PayPal instead of another payment service provider. “The main reason (behind the switch) is that the previous merchant bank slowed down the process,” shared Mario Peng, co-founder and CFO, HotelQuickly.

  • Specific payment challenges:  A payment solution also needs to address several other options other than processing speed.

From a company’s perspective that specialises in transactions via a mobile app, Peng mentioned that entities can face several mobile inbound payment challenges. These include: payment outside of app, network stability, and speed. The team not only looked at associated costs as it attempted to find a solution. It also considered several factors such as currencies, and faster processing. At the same time, HotelQuickly also sorted out several outbound payment complexities (pertaining to dealing with hotels), such as administrative costs, human errors and fraud. Peng referred to a chained payment solution: Immediate and automated payment to PayPal account of hotel, and no follow-up for failed card, wrong amount charged, double charging, or fraud.

  • Weighing options: It’s always advisable for any organization to assess the value and weak points of an emerging payment option.

Both OTAs and airlines have been news for accepting crypto-currency bitcoin. OTA, which crossed the $1.5 million mark for sales of flights and hotels in bitcoin a couple of months ago, acknowledges that Bitcoin is in its nascent stages and it’s subject to all of the fluctuations in value. But it is a promising option, working in favour of consumers for several reasons. recently mentioned in one of its blog postings: “We think the online legacy payment systems are ridiculously unwieldy – customers must fill out long forms, sharing personal information like their address and credit card security codes just to make a simple purchase and all of this complexity does not eliminate fraud.”

As for a bitcoin transaction, this method is being considered to be hassle free. It also paves way for transparency by removing hidden fee, such as 3% cost to process credit card transactions.

  • System integration: Airlines also need to consider complexity of system integration that needs to be taken care of - different gateways for different channels, multiple integrations required into a variety of business systems etc.

As Waqas explains, for any airline, the transactions happen globally from various sources- own offices, agents, BSPs etc. “ Having different gateway channels and multiple integrations create problems in maintenance, duplication of efforts and complexities in tracking the transactions. (It is) preferred to have one gateway wherein all channels can be routed through. There will be a need to develop one integration,” he says.

  • Fraud management: Airlines not only need to look at fraud from credit card transactions, but also digital wallet payments. Of utmost important is to understand and prepare for doubtful actions that are usually associated with fraud. Say developments such as demand for a change in account details, or activity from a non-account contact number or email id.

The sector needs to look at how shift of fraud to mobile channel is shaping up. This is clear need for stronger inspection and tailored fraud rules. One needs to look at fraud implications due to issues pertaining to 3DS authentication. Also, fraud varies by channel web, mobile and phone. Organizations today have to plan for fraud data and act on all available data when implementing fraud rules.

If you are keen on learning and debating about the latest developments in the arena of travel payments and fraud, then join us at Airline Information’s 8th Global Airline & Travel Payments Summit - ATPS 2014 scheduled to take place in San Francisco (3-4 December, 2014).