Ai Editorial: Understanding peculiar issues associated with emerging payment methods

Ai Editorial:  Bitcoin, Alipay, convenience store transactions etc. exemplify the diversity in payment methods. And such options call for management of atypical issues, too, says Ai’s Ritesh Gupta 

Any sort of improvisation in a payment strategy requires introspection on several counts, be it for evaluating payment complexity, impact on the user experience, ensuring security for that particular sales channel or ability to monitor the fraud chargeback activity.

And today change is inevitable considering the increasing popularity of specific payment options in different markets. Airlines have to adjust as for many it’s a cross-border business.

There are certain market nuances such as prevalence of local domestic payment methods that can drive payment strategy – for example, convenience store payment in some Asian countries. Also, unlike credit card, each of the payment options in Asia has its uniqueness, e.g. transaction limit, availability of refund, chargeback rights etc. It requires airlines to design and implement necessary payment interfaces and processing flows.

Overall, airlines need to look at peculiar issues as they embrace new form of payments. Here we assess a couple of aspects:

• Cost analysis

An airline might be running operations smoothly in several markets, but a similar move may result in additional expenditure in a new one.

For instance, in case of China, it’s imperative for travel brands to offer options like Alipay and or let Chinese consumer pay via WeChat.

As per the feedback from specialists pertaining to Alipay, operating in China requires a separate integration cycle and payment acceptance service level than would typically be needed for other regions and markets.  “PSPs like Stripe and Braintree provide for a more seamless integration on the backend, however because of regulations in China and Alipay’s market size, it is easier for brands with interests in China to work directly with the payment platform,” shared a source. Importantly in order to integrate a PSP like Alipay, a company based in the U. S. may need dedicate resources and staff for processing and acceptance for the Chinese renminbi.

“While enabling Alipay payments is critical to gain visibility and drive transactions in China, for smaller hotel chains, airlines or OTAs this additional resourcing is a large undertaking that can put a strain on cash flow and carry higher requirements for security against chargebacks. Additionally as Alipay remits payments through SWIFT, OTAs and travel brands will have to plan around payout timetables - which vary from country to country- and the applicable fees,” shared a source. “Another thing travel brands should consider the user experience, as travellers are completing their travel booking or reservations. Several PSPs oftentimes redirect users away from the branded site or app to complete their transactions an experience that travel brands cannot control or manage, which can lead to confusion, or worse, booking abandonment.”

• Infrastructure related issues

For airlines, the fact that the process can involve their legacy infrastructure, it only adds up to the work that’s needed to be done.  

“One of the key issues faced by airlines is heavy reliance on legacy infrastructure that prohibits them from adapting to the fast changing world of payments. If this is not addressed in a timely manner, airlines can risk becoming uncompetitive and non-relevant,” says Shreyansh Durgesh, Director of Sales and Business Development, Asia Pacific, Bitnet Technologies.

Delving deeper, Durgesh says, “Sometimes it is seen that airlines are unable to or take too long to launch new payment capabilities due to their backend system being too complex to work with new technologies. Lot of airlines have built their functionalities and respective business processes on top on a legacy mainframe application.”

“Most of the time these legacy infrastructure and their limitations determine how payment related processes or functionalities can be changed,” he says. For example, an airline’s DCS (departure control system) may follow certain rules to flag a risky booking based on fraud detection systems for further checks during check-in. But if the fraud detection and legacy platform are not compatible, it can lead to sub-optimal usage of such fraud detections services.

• Fraud management

In addition to coping up with the challenge of system integration (each payment method works differently which means that each implementation can be costly and lengthy), another hurdle that comes with the new methods of payment is fraud as fraudsters always evolve to find ways of exploiting weak spots in payment processes and systems. So fraud management should be on top of the agenda for any airline integrating new payment methods.

There is also need to clarify certain points, too. For instance, bitcoin is like digital cash. So is there any way to recover or whom to approach when bitcoin is stolen?

Here it needs to be understood that bitcoin wallet private keys are the only proof of ownership of bitcoins. Once these keys are stolen it is impossible to reclaim ownership of bitcoin, says Durgesh.

“Bitcoin is decentralised protocol and not regulated, hence there is no central authority to turn to in case you lose your bitcoins. There have been number of bitcoin related compromises in past but they are not due to weakness in bitcoin protocol itself and rather due to because of weakness of security system employed or negligence of bitcoin service providers,” he says.

So it is important for consumers to carefully select their bitcoin service provider who has appropriate security system and policies to safeguard consumers’ bitcoins. There are specialists who keep bitcoin stored in secured, geographically separated cold storage as well as insure users against any losses, says Durgesh. Also, as the bitcoin ecosystem continues to grow we will see a lot more innovation in provision of wallet security services. 

Being nimble

As the payment ecosystem continues to evolve, airlines need to be nimble. Be it for gearing for EMV liability shift in the U. S. or capitalizing on the popularity of an offering like Alipay in China, there would be changes for merchants. It is of paramount importance to be aware of requisite resources and the level of expenditure required to set up a new method of payment. Plus issues associated with integration with legacy systems, back-end operational systems etc. as well as fraud management, too, need to be scrutinized.

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