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03/11/2020

How to make payments work for your passengers and your airline business

Airline Payments Orchestration
AUTHOR
Vojin Rakonjac, Head of Payment Solutions

The journey that a payment takes from an airline passenger to an airline company involves many steps, but it is probably the singular most important factor in the process for both parties.

Airlines have complex payment processes that occur across various sales channels, devices, countries, currencies, payment instruments and intermediaries. Similar to flights themselves, payment data has a long way to travel before it reaches its final destination. It is passed from customers to airlines, from airlines to third parties and corresponding payment processors, and finally, funds are transferred to the acquiring banks. Behind every transaction, there is a delicate orchestration of steps and routes that the payment must take. Every decision on this route not only directly impacts an airline’s revenue, where an ineffective turn represents an additional cost, but could also be the difference between a passenger making or abandoning a purchase.

Optimizing payment infrastructure and preventing revenue loss means removing barriers that affect both the airline’s bottom-line and the customer experience. Customers are most interested in payment options which are simple, fast, and familiar – delivering a frictionless checkout process. On the other hand, an airline needs to guarantee safety and cost-efficiency by honoring regulations such as PCI, preventing fraudulent activities and guaranteeing connectivity to processors that enable better acceptance rates and lower fees for them.

So how can airlines make payments work for their passengers and their business? Check out our 5 top tips below.

Provide more payment options

Payment transactions are short in duration compared to the total amount of time an airline’s customer spends traveling. But these moments count. If a customer wants to make a payment and an airline can’t support their preferred method, revenue is lost. It is important that these payment methods are accessible and that the passenger has the choice to pay how they want. For example, when Finnair introduced Alipay for in-cabin payments, sales increased by 200%.

Streamline the process

Revenue opportunities are lost if there are too many steps in the payment process or a customer is redirected multiple times to 3rd party websites. Furthermore, if there is technical downtime with either the airline, processor or the acquirer, a customer will abandon the payment and probably won’t return – another example of an uncompleted payment and lost revenue. Nowadays, people also like to make purchases at their own convenience and often using mobile devices – therefore, having a mobile-friendly platform or a downloadable app makes good business sense and could open up new opportunities to drive growth.

Secure the payments path

Firstly, you need to be aware of potential fraudsters. It’s proven that the airline industry loses $1.4 billion per year just on fraud. Different PSPs have different systems and rules that are associated with fraud and yield different results. The airline industry has specific customer needs and airlines should consider having an in-house solution for their tailored requirements. And what about data hijackers? They will take advantage of airlines exchanging sensitive data with business partners and providers. While PCI regulates these paths, it is an airline’s responsibility to make them safe. If a data breach occurs, this can be costly for… financially and reputationally. Hence why partnering with a tokenization provider is beneficial. They enable airlines to pass sensitive data to partners through their gateways, taking full financial liability in case of stolen data and helping to secure this process.

Variety is also key for airlines

If a payment can’t be processed, an airline should have another processor. If not, everything stops until this is resolved. And remember, not all PSPs are equal. Some can offer greater acceptance in specific regions or better commercial agreements than their competitors. The “Toll” to be paid will be different depending on the route taken. A customer’s geographic location causes a transformation of all payments into local transactions, eliminating cross-border and currency conversion fees for international transactions. Simply having an option to choose between multiple providers and acquirers guarantees a better negotiation position in terms of who gets your business.

Track all transactions

Even if payment instructions are sent and the payment is processed, the journey doesn’t end there. You need to ensure that nothing is lost along the way. This means that all fees and transactions are captured and matched to reconciliation/settlement files from the processor/acquirer. Airlines allocate resources to write-offs in case of mismatched financial records. Having more payment instruments and more processors increases the chances of mismatches occurring as there are more contracts, fee types and documents that require cross-referencing. Airlines should store as much transactional data as possible to be able to track this more precisely. Having an automated engine that collects different types of reconciliation reports and automatically maps them to internal financial records lowers the number of write-offs and ensures that airlines pay only their obligated fees.

As well as choosing payment providers that can guarantee better deals for specific countries or regions, and generating additional revenue through more acceptance, lower fees and less write-offs, airlines can also deliver an enhanced and potentially more profitable customer experience with the right payment routes. While there are many steps to consider – from offering the right payment options during checkout to keeping a record of all transactions – airlines can make payments work for both their passengers and their bottom lines.