Payments in omni-channel environment – what to watch out for in 2016
Ai’s Ritesh Gupta takes a detailed look at 13 key issues and developments, including IT infrastructure, NDC, data strategy, fraud, security etc. that airlines need to keep a tab on.
Mobile wallets, wearables, QR codes, in-store, self-pay kiosk, PC, tablets, bitcoin…the list of existing and emerging touchpoints and encompassing technology that can facilitate a transaction continued to get prolonged in 2015.
On top of this, the possibility of identifying a passenger every time they get in touch with a brand is forcing airlines, OTAs and the travel sector on the whole to go for a flawless payments strategy.
And the story doesn’t end there.
Customer experience, backed by data and analytics, is just one aspect. So if the choice of payment just the way a traveller needs is one side, evaluating legitimacy and tackling fraud in real-time is the other side.
So in 2016, airlines would need to act swiftly to keep up with the pace of change in this arena. Here we explore top developments and issues that are important for offering a sublime experience and fraud management:
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Being in control via ownership: Airlines need to own their own travel ecosystem. It’s important for airlines to look at the entire payment chain, from gateway to risk, to acquiring, and identify areas in which they can prioritize improvements. Airlines need an infrastructure that lets them manage complex payments ecosystems, passenger smart devices and other vendors, and not be managed by them. Dealing with multiple channels, devices and operating systems, multiplied by the many payment methods and consumer digital wallets is difficult. With rising complexities, the industry needs to take control of the transaction, and they need the flexibility to add or remove payment service providers, depending on local market conditions, behavior of the traveller etc. Airlines need to gear up for an integrated solution for the entire payment chain, as well as support alternative payment methods, and look for a single line of reporting and reconciliation.
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Airline IT set up: In case airlines are using legacy systems, there is a need to overcome limiting capabilities of such infrastructure. Importantly, it ends up being an investment decision. As specialists point out, airlines need an extraction layer that can orchestrate new payments methods, reduce time-to-market and reduce the costs of supporting those transactions and methods across the various digital channels including mobile. A mechanism is worked out taking into consideration all the sales channels and this layer deals with one or more payment service providers, and streamlines operations such as multi-acquiring switching, alternative forms of payment, reporting etc.
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Gearing up for NDC: NDC is fine, but are airlines ready to offer a better payment experience? There are several dimensions that need to be considered as airlines move toward selling products in a different way. One of the most complicated aspects that need to be addressed is the authorization and settlement of a transaction, featuring multiple players (could be two airlines or even other suppliers such as hotels, car rental etc.). Considering the complex payments landscape, it isn’t going to be a straightforward process to optimize the payment experience.
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Consistent experience: For a traveller, airlines need to focus on areas like cross-channel seamlessness and un-broken transactions. One can’t do without simplifying the pathway to purchase. The role of analytics and user experience design can’t be underestimated. If we talk of mobile, the shopper flow is often compromised at the payment stage by two key failures – a clunky look and feel, and multiple steps to complete the purchase. The user journey must have no barriers, and airlines must support seamless journeys by using one-click and simple-click functions for authentication and security measures that are handled in the internal environment
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Data strategy: Combining external data with internal data gives airlines a much better view of the passenger – better security, better authentication, a better passenger journey and a big-picture understanding of what’s happening on a per-passenger basis. It is important for airlines to capture data across all payments channels through a single integration.
Identifying travellers across payment channels, and thereby paving the way for a faster check out regardless of location or device they are using, is a clear benefit of an omni-channel approach.
Once the infrastructure is in place, real-time API’s can deliver information about the payment preferences and behaviour. So be it for simplifying payment page, tailored options (for example, once it’s ascertained that the card user is a German, he or she could be offered a cheaper payment option suited for that nation), stored card details or optimizing for mobile, all can benefit a travel e-commerce brand.
Also, this would ensure that airlines have the flexibility to switch payment service providers (PSPs) or change data on the outside without locking themselves into a particular provider. Because if payment data is stored with a particular PSP, the airline is ground-locked. Airlines should store data internally or store it with a trusted partner who’s independent from PSPs and other payment source providers, and who not only stores the data and treats it as internal data but also assumes the responsibility of not getting hacked.
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Spreading the word: The lack of understanding of how a new payment option can be activated, and coordination between various departments for the same is a major issue. For instance, if we talk of bitcoin, there is curiosity about how this currency works. The only way to generate new bitcoin is by a process called mining, which simply means usage of computing power for validating bunch of bitcoin transactions (also known as blocks). Bitcoin protocol is designed in such a manner that it takes about 10 minutes to validate these blocks. Every 10 minutes a ‘miner’ successfully validates one of these blocks of bitcoin transactions and is awarded 25 bitcoins as incentive for contributing his/her computing power. Since bitcoin’s inception this validation process has been executed many times to produce 14.5 million. It is worth noting that the bitcoin award get halved every four years. This ensures predictable and decreasing rate of bitcoin production.
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Local intricacies: An airline might be running operations smoothly, including acceptance of payments, in several markets, but a similar move may result in additional expenditure in a new one. A prime example is alternative form of payments (AFPs). These options 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. Consider India. 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. In case of China, it’s imperative for travel brands to offer options like Alipay and or let Chinese consumer pay via WeChat.
Also, some local payment options in Asia may require the airline to have local registered entity, especially if the settlement goes directly to airline. A major challenge for accepting payments from customers is the low credit card penetration rate and acquiring bank charging cross border fees to customers.
Airlines need to adjust their operations, too. For instance, the settlement process of alternative payment methods can differ vastly. In case of SEPA Direct Debit, one of the preferred payment methods in Germany is asynchronous, meaning that there is no real time confirmation that the funds are guaranteed. As confirmation is given after several days, therefore this payment method should not be available with a short time to fly.
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Studying AFPs in detail: Every market has its own requirements. In fact, even within one continent, too, the requirements might differ vastly across countries. 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 are only focusing on an online real time debit payment system as an option. It allows buyers to use their Internet banking to pay for their online transactions.
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Avoiding revenue leakage: Airlines can’t afford to go overboard with 3D secure. Traditionally, online merchants have adopted a binary view to 3D Secure; implement it across all transactions, or don’t implement it at all. However, both of these approaches have problems. If you apply 3D Secure to all transactions, conversion will suffer, and if you don’t apply it at all, fraud will still be a factor. But there is a third possibility – selectively applying 3D Secure only to high-risk transactions, based on data customized to the airline.
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Combating fraud: Managing online fraud is an ongoing initiative, one that needs constant improvisation for better results. If this is not the case, then a travel organization would end up being a soft target, leaking revenue that shouldn’t have slipped from its grasp. In fact, despite having a team in place, one can still suffer at the hand of fraudsters. Hackers/ cyber criminals way of functioning continues to evolve. So airlines need to make the most of APIs that can automatically feed threat indicator data into their own security systems. Also, in the current scenario, one must do the detailed review of the past and present transactions and identify in case if there is any suspicious activity happening around. Other recommendations include: Detailed analysis of payment failed transaction; Regular updation of negative and positive data base of the customer; Detailed verification of the high value transactions; More co-operation and collaboration with the fraud departments of airlines / banks and OTA to exchange the fraud trends.
Also, airlines need to look at machine learning. It promises to combat fraud. One of the best things about using machine learning is that it automatically learns about new fraud patterns in real-time so you don’t have to keep close tabs on new tactics. When patterns of real-time fraud are mapped against examples of past fraud, merchants can accurately predict when they’re seeing a good shopper or a malicious one – so they can block the fraudsters, or make it easier for good customers to buy.
As for avoiding chargeback debits, there is a need to improve upon dispute management processes for the entire merchant community.
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Working with travel agencies: First of all, airlines should look at the weight of indirect distribution in their overall channel mix. Secondly, they must analyze how big of an impact fraud is on this channel – this is often hard to track for airlines because the information they receive in a chargeback may not include reservation details. The lack of automation and the long cycle of a travel agency sale often make it difficult to react quickly. So airlines need to gear up for real-time visibility of all transactions processed via a payment platform. This will allow airlines to have not only a single repository of payment and PNR details, but also enable them to easily take corrective actions on bookings, look at statistics and monitor performance.
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Protecting customers: When an organization stores or even makes customers use their credit card details, it puts itself in a position of responsibility. Travellers need to trust that airlines and OTAs are handling their credit card details securely. Now there is an option to transform all credit card details into tokens. This ensures even if a fraudster accesses stored tokens, there is no method of converting that data back into useful credit card details.The industry is also looking at new options such as biometric verification to prevent fraud as well as make it easier to pay securely.
Changing payment landscape: In its recent report titled, Omni-Channel Banking The Digital Transformation Roadmap , Efma & Backbase referred to disruptive climate of banking.
The report referred to what the likes of Apple (in possession of most consumer credit cards, growing iTunes ecosystem and Apple Pay), Google (Android Pay, sending money via Gmail) and PayPal (handling more international transfers than the top five banks put together) are up to.
There is a need to keep an eye on the functioning of banks, too. It is being highlighted that these organizations are currently in the experimentation or deployment phase of their omni-channel strategy.
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