Ai Editorial: Gearing up for AFP's in Asia
Accepting AFPs in Asia – it’s about handling intricate issues
Alternative form of payments (AFPs) is flourishing in Asia. Each has its own unique application and settlement process, language/ currency support, and is subject to domestic rules and regulations. Ai’s Ritesh Gupta reports.
It can be quite demanding for any travel e-commerce entity, be it for a mature business or a start-up, to finalize an apt payment strategy in the Asia Pacific region.
AFPs have gained traction, and they generally tend to address a domestic economy. It’s a fragmented space, and airlines need to understand intricacies of each market.
In China, around 45% of online transactions are made using e-wallets, such as options offered by Alipay, China Unionpay and TenPay, and other emerging options include WeChat payment.
A company needs to be spot on otherwise the conversion rate can take a dip. For instance, Uber, the mobile app-based transportation network, has worked out an effective zero-click payment mechanism. Users of the app simply register their card as card-on-file, request their drive, and their card is charged at the end of the ride. After registering, the payment will subsequently be made when you use the app, and there is no need for the customer to go through a payment process. But recently, Uber decided to introduce cash option to make it service more accessible in India. So customers can pay via prepaid wallet, debit/credit card or cash.
There are various factors airlines and travel e-commerce businesses need to consider while assessing which alternative form of payments to go for across the Asia Pacific region. A prime reason behind this is the variety of payment options that are available, which are as diverse as the region itself.
Low credit card penetration
Talking of the Asia Pacific region, Bangkok-based Mario Peng, CFO at hotel mobile booking app HotelQuickly says a major challenge for accepting payments from customers is the low credit card penetration rate and acquiring bank charging cross border fees to customers. To reduce credit card acquiring fees, remove cross border fees charged to customers and to offer alternative payment solutions to reach non-credit card holders, merchants are required to set up local legal entities and/ or work with different payment service providers for markets in Asia.
“It is quick and easy to setup global credit card acquiring. But there are many markets where credit card acceptance is relatively lower than say Hong Kong and Singapore,” says Peng. “So for markets like Indonesia, Vietnam, Philippines, Thailand etc. the team is looking at alternate payment methods – and for the same it evaluates both commercial and technical aspects of tying up with a payment gateway.” A local payment gateway fulfils certain legal requirements, and then airlines or OTAs assess the ability to facilitate payments for preferred payment channels. For instance, in Indonesia, as Peng told us the company is evaluating two payment service providers – while one can facilitate ATM transfer, convenience store (these are semi-digital payments - a consumer takes a code or a QR Code associated with a booking and pays), and online banking, the other isn’t able to offer online banking as an option.
Hong Kong-based Joseph Chan, CEO, AsiaPay says various non-credit card payment options have different rule sets. For example:
- Maximum payment limit cap;
- Mostly does not support pre-authorisation, void, partial capture and reversal;
- Refund could be offered online but only possible offline in some payment options;
- Settlement cut-off
Chan says an ePayment partner in Asia for airline can readily address the following challenges that airlines may face as they plan for added local payment options:
- Some local payment options in Asia may require the airline to have local registered entity, especially if the settlement goes directly to airline;
- Many different payment options are not readily designed for multiple channels and mobile response. Extra cross-channel payment interface design and development may be required if airline goes directly with local payment platform;
- Unlike credit card, each of the payment options in Asia has its uniqueness, e.g. transaction limit, availability of refund, no pre-authorization, chargeback rights. It will require airlines’ necessary effort to design and implement necessary payment interfaces and processing flows.
- Considerable effort may be required by airline to consolidate payment transaction especially for easier reconciliation and reportings of sales and settlements across payment options, and not to mention for CRM, payment analysis reference.
- Apart from credit card, some of the Asian countries are still in cash market so local alternative payment such as netbanking, OTC, debit card, ATM payment as well as cash counters etc are the major payment methods practice in these countries like Thailand, Philippines, Indonesia, Vietnam etc.
Penetration of AFP
As for AFP, there isn’t any consistency across the market.
Unlike most of the other countries in the Asia Pacific region, options for AFP are yet to take off in a big way in Australia. Carriers in Australia have listed POLi, an online real time debit payment system, as an option. It allows buyers to use their Internet banking to pay for their online transactions. POLi is currently available within Australia and New Zealand. Among other carriers in the region, Air Asia added POLi as a fee free payment option on their website few months ago.
“There is no credit card fee, and the system results in instant booking. Of course, a major lure that works in favour of POLi is that it results in consumers saving significant amounts of money. So say, for a family of four, booking via POLi would end up in A$30 savings,” says a senior airline executive. As for facilitating one-click payment via mobile devices, the executive says the market is still “2-3” years far off. “There are certain legislative issues, too, that can hamper the growth of mobile payments. For instance, it isn’t allowed to store CVV in Australia. The privacy laws are quite strict at this juncture. So this can impede the implementation and the take-up for services that are burgeoning in other markets.”
Gurgaon, India-based Jibby Jacob Kollanoor, director, South Asia, UATP, says consumers want to be able to pay with the local AFPs they are used to and comfortable with. “One of the most popular AFPs in this region is Alipay, an e-wallet in China that is also capturing a large percentage of the mobile wallet space,” he says.
Preparing for bitcoin
Airlines also need to gear up for emerging digital currencies like bitcoin. To initiate a bitcoin transaction, a consumer must have a bitcoin wallet. “The easiest way to get one is by choosing one of web based wallet services providers such as Coinbase, Blockchain.info etc. Once the wallet setup is complete consumers must fund their wallets with bitcoins purchased from either local bitcoin exchanges or by other means. These bitcoins can then be used to purchase tickets at airline websites,” says Shreyansh Durgesh, director of sales and business development, Asia Pacific, Bitnet Technologies.
According to experts, bitcoin simplifies airline payment by eliminating any risks and unnecessary costs associated with payments. But there is still lot of apprehension among airlines regarding bitcoin due to its price volatility, regulatory concerns etc.
For its part, Bitnet has simplified bitcoin acceptance for airline merchants.
“With Bitnet, an airline will not touch, store or process bitcoin. Airline will be able to price their tickets in local currencies. We will accept bitcoin payment on their behalf and pay the airline in local currency of their choosing,” shared Durgesh, who added that Bitnet has simplified airline bitcoin payments with its UATP partnership.
Finalizing plans for AFP
Kollanoor says a lot of factors need to be considered before finalizing which AFPs to go for:
- Know the local requirements, such as whether they are required to partner with a local entity in order to start connecting with local consumers.
- Understand what types of AFPs the consumers in that market are used to – do they prefer bank transfers, e-wallets, bitcoin, local credit card, etc.
- One of the most important to consider is to understand the complexities of integrating with a particular AFP; the goal is to expand payment acceptance and to get to market as quickly as possible to generate new revenue.
Each payment option has its own unique application and settlement process, language and currency support, and is subject to domestic rules and regulations. Kollanoor says airlines can use their existing UATP infrastructure and reporting solutions to quickly bring AFPs to market.
Airlines need to understand the limitations of their systems. It needs to be assessed whether airline should build a direct connection from scratch that constantly needs to be maintained, or rather they can utilize their existing acceptance platform and back-office processes to enable the new payment methods. Also, reconciliation remains a big issue for the airlines; it can be rather labor intensive and be a long, tedious process if done manually. There is a need to gear up for simplified daily reconciliation.