In the next 10-15 years, it is likely we will take for granted making payments with our smartphones, as opposed to using a card. New and not-so-new providers are elbowing their way into this space. Apple, Samsung, Visa, MasterCard, PayPal, Google, and Vodafone are among today’s front runners, but tomorrow’s Google of payment may still be a twinkle in the eye of an undergrad student.
Airlines will need to be ready to both exploit the opportunity this provides and meet the expectations of customers. These payment methods should not come as an inconvenient surprise and should be easily integrated into systems and processes being designed today.
By taking a strategic approach to payments now, and working to make them more dynamic and accessible for passengers, airlines create opportunities to increase revenue in the more immediate term.
“Airlines are beginning to realise that, just like traditional merchants, they need their own payment channels. Payments are not just a requirement to get ticket sales, but rather a competitive advantage for increasing revenues,” says Kristian Gjerding, founder and chief executive of Cellpoint Mobile, a payment-solutions and professional-services provider for global airlines. “Doing payments wrong will incur mass lost opportunity situations where airlines will lose opportunities to generate revenues.”
Airlines that effectively manage their payments ecosystem from beginning to end will reap rewards, generating opportunities to increase revenue incrementally by “potentially hundreds of millions of dollars", predicts Gjerding. “Even for smaller airlines, there is significant capability.”
Global e-commerce transactions will hit $2.4 trillion by 2019 and 23% of these transaction will be coming from mobile devices, according to the Worldpay 2015 Global Payments report, published in November.
Aside from cards running on global scheme networks, such as Visa, MasterCard and American Express, there are more than 300 types of alternative payment in the world of e-commerce. Bank transfers, direct debit and prepaid cards come under this umbrella, but so too do e-wallets, mobile wallets and even just providing a mobile number to pay. Worldpay forecasts that by 2019, these alternative payments will claim 55% of global e-commerce turnover.
NEAR-TERM THINKING
A key technology behind mobile payments is near-field communication (NFC), which has its roots in radio frequency identification. This is no new kid on the block, having been around since 2004, but is now gathering momentum. The latest Apple and Android smartphones have NFC chips and the big hitters in the card community – like Visa, MasterCard and American Express – have all enabled contactless payment. Visa Europe saw 1.7 billion contactless transactions in the year to 30 September 2015. In January, MasterCard announced it was partnering with Coin to bring contactless payments to a range of consumer gadgets, accessories and wearables, as part of its “Commerce for Every Device” programme.
NFC is also starting to gain traction along the airline passenger’s journey. “The airline business is on the cusp of reaping benefits from NFC that will enable passengers to move through their journey faster and smoother than ever before. Not only for onboard payments, but for authentication at checkpoints (such as boarding gate, lounge entry etc). The contactless tapping of the passenger’s NFC device, wearable or otherwise, will be more secure and faster than grappling with a physical card [or] passport,” observes Rich Salter, technology chief at fibre-optic IFE system supplier Lumexis.
“And for buy-on-board, tapping a watch or other personal electronic device for payment means not having to fumble for credit cards while strapped into a seat.”
The seamless, easy self-processing imperative the aviation sector is applying to each step – from booking to boarding to bag recovery – when applied to payment offers powerful opportunities for airlines to engage with customers. The secret to unlocking that wealth of opportunity is a one-click checkout mechanism, argues Gjerding.
“If I have to buy a $5 wi-fi connection and you want me to enter my credit-card details and create an account and whatever other nonsense I have seen online, that will decrease the conversion dramatically," says Gjerding. "Whereas if I can just touch my fingerprint reader on my iPhone or my Android device and the payment transaction is completed... you know who I am because I am using your app to do it – then that’s going to be massively valuable. It will most certainly create a much better view of your passenger from an airline perspective, because you have a better interaction with the transaction and overview of the transactions and... a more positive experience [for the passenger].”
Mobile payment enables airlines to offer relevant products to passengers at the most appropriate point in their journey. “When combined with technologies such as beacons, ancillary service offers (ie seat upgrades, early boarding, expedited security lanes) can be presented to the passenger, on their phone, at the ideal moment, when the offer is most relevant and when a sale is most likely,” says Judy Morris, product marketing manager, SITA Airport Solutions.
She notes passengers themselves are showing an increasing appetite for booking tickets on mobiles. The latest Airline Business/SITA Passenger IT Trends Survey forecasts an expected increase of 39% in mobile ticket bookings this year and airlines are upgrading mobile apps with services, including enabling passengers to book and pay for flights and ancillary services on smartphones and tablets.
The combination of a mobile process with a richer retail functionality will be an important tool for airlines to deepen engagement with customers. “Airline apps have the opportunity to establish a powerful relationship with the passenger, as they are the passenger’s best source of airline info,” says Salter. “This relationship can be leveraged for many other travel-related activities.”
He agrees that making online purchases via the app seamless and easy with a single click on the likes of VisaPay, MasterPass and PayPal, is a key strategy for revenue generation. “Not only airline tickets, but the airline partners’ services – for example, reservations for hotels, rental cars, and destination activities (reservations for dining, theatre, tourist venues), and duty-free shopping – can be paid for with a single click, and each payment can bring incremental revenue to the airline.”
EXPANDING WALLET
Airline mobile wallets are basic: a repository for boarding passes and itineraries and, at a stretch, they can be loaded with e-certificates and gift certificates. Ursula Silling, founder and chief executive of XXL Solutions, says it is generally American carriers – for example, Alaska Airlines, United Airlines, Delta Air Lines – and low-cost carriers that offer this functionality.
But there is opportunity for functionality to become much more sophisticated. “A more innovative potential use could be collaborative travel planning,” says Silling. “For example, for groups and inclusion of third-party sales in the process, other peer-to-peer solutions, financial services, payment by instalments, payment for additional services/ancillaries and flight changes/rebooking, [and] payment on the high street, including points redemption from the airline.”
The scenario of new payment solutions, mobile apps, and frequent-flyer programmes offers airlines a chance to get even closer to key customer groups such as business travellers. “Possibilities include mobile wallet application loyalty/rewards programmes that can be developed for travel applications, especially for frequent-flyer mileage points and/or rewards points or rebates,” says Neil James, executive director of corporate sales & product management at Panasonic Avionics.
“However, there are still some limitations with mobile payment technology for business travellers. For example, AndroidPay and ApplePay accept mainly personal credit/debit cards, and do not work with most corporate cards,” he cautions.
No doubt this will not remain a hurdle for long. MasterCard threw down the gauntlet to other major payment tech companies by announcing in October it plans to provide tokenisation services to commercial credit-card issuers, which will allow corporations and business travellers to load eligible corporate credit cards into participating mobile and digital wallet services.
REACHING POTENTIAL
The question is, will the mobile payment evolution open up new business opportunities for airlines, perhaps in markets where it was previously harder for them to gain traction? For SITA’s Morris, at this point it is less of a technology evolution and rather “a development of awareness by the airlines of which technologies they can use”.
“For example, in some parts of the world, where infrastructure was not already in place, there was an opportunity to go straight to mobile payments. We see this in Asia and Africa where mobile payment facilities such as M-Pesa are hugely popular. Mobile payments facilitate a more secure method to make large payments, such as for the purchase of airline tickets.”
Vodafone’s mobile money service M-Pesa, first launched in Kenya in 2007, now extends to 11 markets across Africa, Asia and Europe, and at the end of September 2015 had 23.4 million active customers across the Vodafone group. It enables people who have access to a mobile phone but not a bank account to send and receive money, top-up airtime, make bill payments and enjoy a range of other services, including paying for air travel, with airlines as diverse as RwandAir, KLM and Qatar Airways among those accepting the payment.
Silling also observes that in the Philippines, the e-wallet’s share of payment is 17%, and explains adoption in the region was faster simply because of the lack of other options. In terms of airlines adopting digital wallets, she highlights Jetstar Pacific Airlines in Vietnam. “Jetstar is probably one of the most advanced, offering flight ticket purchase by offering the MoMo e-wallet option,” she says.
In Thailand, where a majority of people do not have a credit card, innovative use of payment technology is helping Nok Air sell its seats. “At Nok Air we found a way to offer offline payment via online channels,” says Jerome Seidita, mobile commerce director. “The passenger can make a booking on our apps walking on the street and receive a code to pay at any 7-Eleven or ATM they found on the way. The application, instead of requesting their credit card, will share a code that can be used to make the payment. Once the offline payment is made and confirmed, the app automatically updates the booking from pending to confirmed.”
He adds that on the mobile side, new services arrive every few months that can transform the way passengers interact with Nok Air’s apps for payment. “We are looking at ways to make the customer journey easier and always more secure, but before working with new partners and technologies, we want to make sure our customers will be using them. I can see a great enthusiasm and future in social payments such as Line or Facebook, but it is still very limited at the moment.”
Source: Airline Business
