Airlines will increase their focus on new distribution channels such as mobile and social media over the next two years, according to a report by payment and risk services provider WorldPay.
The report, entitled
‘Alternative Payment and Distribution Landscape: Airline Distribution Channels’
is based on a survey of 68 global carriers from low-cost to traditional. It finds that 83% of airlines believe that improvement and deployment of new payment technology is a major business priority. They want to align their payment offerings with customer expectations to gain competitive advantage.
Carriers are focusing heavily on mobile as both a distribution channel and a means of payment; 71% say the future of airline payments lies in mobile; 50% see mobile payments as a way to keep up with competitors and 45% see them as a way to increase revenues. Mobile payments offer external benefits for passengers but also improve internal processes such as data submission and handling.
WorldPay adds that over the next two years, airlines will extend existing mobile services to offer ancillary purchases such as seat upgrades, booking management, onward travel and in-flight purchases via mobile phones.
“Mobile is not without its challenges,” says Mike Parkinson, vice president (VP) of WorldPay’s airlines sector. “Carriers cite increased fraud risk, integration with current systems and processes and mobile platform diversity as the biggest concerns.
“But with more than three quarters of the world’s population now having access to a mobile device, airlines can’t afford to ignore this high-growth channel.”
The Social Media Opportunity
The report notes that many carriers already have a presence on social media sites such as Facebook, LinkedIn and Twitter. Over the next two years airlines will increase usage on these sites and more – for example, 40% plan to be active on Google+ in the next 12 months.
Social media is now also seen as a high potential sales channel, with nearly a third of airlines planning to enable sales via social media over the next 12 year.
The Impact of In-flight Connectivity on On-board payments
Connectivity is a priority for passengers and this is driving carriers to expand the on-board payment methods they offer and increase services such as in-flight internet and mobile.
Cards are still the most popular payment method used by passengers to pay for goods and services on-board, but alternative payment methods are growing in popularity. The number of airlines offering on-board mobile payments will increase from 5% to 36% in the next two years, and 18% of airlines plan to accept e-wallets on-board by 2016.
Kiosk Investment Declining
WorldPay’s research shows 40% of airlines believe self-service kiosks will be less important in the future, with only 17% of airlines investing more in developing kiosk services, while 29% are investing more in mobile services. This is due to challenges such as the cost to implement and maintain kiosks, difficulties integrating with current processes and the inability to read chip and personal identification number (PIN) cards.
However while kiosk investment is set to reduce, many airlines still plan to implement additional services, such as check-in and seat reservations.
“With new technologies set to replace traditional channels, it’s important for airlines to ensure they’re prepared,” adds Parkinson. “The benefits are clear, but each new channel brings specific challenges. It’s vital that airlines work with a payment partner that has a wide range of products and expertise to improve payment processes and transaction rates and maximise global reach.”
A copy of the report can be downloaded at www.worldpay.com/reports/airline-distribution-channel.
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