Airlines are focused on innovating their mobile payment offerings to capture anticipated revenue potential, according to a whitepaper issued by payment and risk services provider WorldPay.
The whitepaper, entitled ‘Alternative Payment and Distribution Landscape: Airlines and Alternatives – The Facts’, is based on a research study of 56 global airline carriers, from low cost to traditional. It finds that mobile payments (payments for transactions made on a mobile device) are now a key area of focus for airlines.
Fifty-seven per cent of airlines said that mobile has the greatest potential to drive revenue over the next two years – the same percentage as credit cards. The acceptance of mobile payments has already grown to 25% in 2013, an increase from 10% in 2012.
“We currently accept payment through mobile devices through the mobile version of the website, and plan to accept all payment types on all devices in the future,” said Chris Chandler, vice president (VP) financial services for Emirates.
Mike Parkinson, VP airlines, WorldPay, commented: “Airlines have recognised the revenue opportunities of mobile, and are now focused on improving their mobile offering. Over the next two years we can expect to see significant developments in this space, with new innovations in the ways consumers purchase tickets and services via mobile devices from airlines. In the future, services offered via a mobile device will become inherent to the airline experience from booking to check-in.”
The research also explored the alternative payment landscape for airlines and the biggest drivers for adoption of alternative payment schemes. Meeting customer demand and offering choice was the top reason (89%), followed by the cost savings that can be made by customers using alternative payment methods instead of credit cards (64%).
Other findings from the whitepaper include:
- Payment options: In 2013, credit cards (96%), charge cards (86%), debit cards (64%), air miles/loyalty points (54%) and e-wallets (38%) were the top payment methods accepted by airlines.
- Future of payment: A third (32%) of airlines plan to offer mobile payments in the next two years, with e-wallets (29%) and online bank transfers (29%) also on the development radar.
- Benefits of multiple payment methods: Providing the ability to reach new customer segments (63%), lower payment processing fees (61%) and lower fraud rates (50%) were cited as the top three benefits of offering a range of payment options online.
- Incentives offered: In 2013 86% of airlines offered discounts or rewards for customers using alternative payment methods to credit cards; an increase from 55% in 2012
The biggest challenge for airlines implementing alternative payment methods without external assistance is the lack of integration with current systems and processes, followed by the cost of implementation (39%).
“Direct integration with a payment type is too complex both from an IT aspect as well as from an accounting and reconciliation perspective,” said Maarten Rooijers, senior manager e-payments for carrier KLM. “The complexity increases if you, as an airline, want to implement more alternative payment options. Therefore we work with expert payment service providers to manage this connection on our behalf.”
However, 88% of airlines believe enabling alternative payment methods is critical for revenue growth.
“Airlines have long been reliant on credit cards as the primary payment type offered but they are increasingly embracing the implementation of alternative payment methods,” said Parkinson. “There is a growing recognition of the benefits of providing a range of payment types, not only in terms of meeting customer demand but also reducing the cost of transactions.
“However, integration with current processes and systems is seen as the biggest challenge for implementing new payment types. Airlines therefore need to choose a payment partner that can manage this integration and advise on the most appropriate payment types to offer from the 230+ payment methods available globally.”
The whitepaper can be downloaded here.
SWIFT has announced that it has successfully completed the first phase of the global payments innovation (GPI) initiative pilot, clearing the way for the go-live of the service in early 2017.
Sentiment in the financial services sector deteriorated in the three months to September, as firms digested the challenges of lower interest rates and the uncertainty caused by the vote to leave the European Union (EU), according to the latest CBI/PwC Financial Services Survey.
However, a London summit on the industry’s introduction of the technology cautions that testing and acceptance are still at an early stage and firms should proceed with caution.
The proposals of both US presidential candidates could shake up operating conditions in several sectors, reports the credit ratings agency.