Ai Editorial: All new payment options may not pay off in travel commerce

First published on 15th June, 2016

Ai Editorial: New payment options, especially 3rd party mobile wallets are exciting. One needs to assess how all of this fits with the complex world of airline payments, writes Ai’s Ritesh Gupta

 

The buzz around some of the new ways in which one can pay for a transaction is unmistakable.

What is increasingly standing out is the ease with which we can pay.

Options like Apple Pay and Android Pay let travellers check-out with a single touch. Travellers can get going by adding their preferred debit or credit cards. And this means businesses gain instant access to an extensive user base potential.

And it’s not only Apple (which continues to make progress, for instance, Apple Pay in China) and Android, even Facebook and Amazon are making news. Plus, one can’t ignore other options such as Alipay that have become dominant for targeting a particular section of audience/ market. In fact, talking of Alipay, the fact that it is a part of Alibaba group (includes Alitrip and other divisions such as big data/ cloud computing), brands need to be a part of such shopping ecosystem. It offers content/ information and shopping environment in a seamless manner. The likes of Air France-KLM and Cathay Pacific already have Direct Connect agreements in place with Alitrip. As for Alipay, supported methods include standard web, web-to-mobile, and in-app transactions.

Embracing various mobile payment options are paying off. Early movers in mobile payments are already witnessing benefits. Transavia’s mobile payment share stands at 20%, which according to Adyen, is 65% higher than the airline average. The airline has benefited as it focused on crafting a mobile-optimized experience.

Dealing with constantly evolving payments ecosystem 

There are several areas that need to be looked upon as options increase:

-       Be realistic: The travel commerce ecosystem is complex, with many moving pieces. “I think airlines will always need to be in full control of the payment ecosystem. It’s something that an airline or OTA does very well, better than these (Facebook and Amazon) networks. Some brands like PayPal make total sense and work well within space, but when it comes down to it, managing payments needs to be owned entirely by the airline or OTA. Many of the reasons why to revolve around risk, bookings, issuer relationships, travel rewards and beyond. Getting from point A to point B on the map hinges on money moving from account A to account B. As travel itineraries change, upgrades, cancellations, and delays occur there’s a delicate dance that needs to happen,” explained CardinalCommerce’s VP, Consumer Authentication, Michael Roche.  

In case of airlines, “may be you will see little to no incremental sales lift from adding an alternative payment brand. Much of the time offering another brand is going to cannibalize your current card business, so you need to make sure that it’s going to be worth it: rates, risk, and operational overhead,” asserted a source.

Referring to the likes of Facebook and Amazon, a source said, “(I doubt) if it will ever make sense to outsource the full payment functionality that airlines and OTAs have today. I also don’t think these networks will have the capacity to handle it on the levels that would be required. There’s a big difference between buying and delivering a pair of shoes vs. booking an international trip with two layovers. Being a great airline or OTA means you have an efficient payment ecosystem.”

-       Adopting new options: Airlines are going to have challenges with any new payment types that don’t pivot on the credit/ debit. “Anything that doesn’t use the authorization and settlement model will cause additional work across the travel infrastructure. Most payment networks and brands are going to present a challenge. PayPal, however, has had adoption success within the travel industry since it ties closely with the network card model,” said Roche. When considering any new payment options, you will need to do your due diligence to ensure all entities within the supply chain can handle how it operates from authorization to settlement along with all other payment functions like refunds, reauthorization, split orders, and any other type of customer service use cases that you could imagine.

Airlines need to work with their respective acquirer or PSP when identifying a new payment type. They should also discuss it with all other entities which handle bookings, customer service, or any other function where payment is tied to action throughout the travel lifecycle.

A specialist like CellPoint Mobile highlights that when it comes to supporting Android Pay, it would only require a few tweaks to their existing configuration, and passengers will have access to Android Pay in less than one week. Option like Android Pay should work seamlessly across all the e-commerce channels deployed by airlines, and one also needs to ensure how passengers’ payment, loyalty, and transaction data would be protected.

-       Keep an eye on the future: What we’re going to see in the future would be a payment ecosystem that’s more secure, confident, and accountable. The risk is going to be mitigated across the supply chain, and the online payment channels will become as trusted as the Card-Present space. Experts recommend that airlines keep their eye on these concepts in the next couple of years:

-       Wallet Mobilization of the POS

-       Strengthened and streamlined acquiring relationships

-       EMV Online

-       3-D Secure 2.0

-       Payment Tokenization

How is the world of 3rd party mobile wallets shaping up? Hear from experts at the upcoming 5th Airline & Travel Payments Summit Asia-Pacific to be held in Kuala Lumpur (17-18 August, 2016).

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