19 Apr The Money Shot: What’s the future of payments for airlines in a mid and post-Covid environment?
Airlines need rapid access to funds to keep their high cash-burn businesses going even in the best of times. With advanced bookings shrinking, because of the pandemic, and a greater number of customers booking last-minute, cash flow is more critical than ever. Airlines need to ensure that they don’t lose a sale because of friction in the payment process or have transactional delays because of fraud claims or other complications. More than that, airlines need to keep up with consumer payment habits, while adhering to new hygiene protocols and offering sufficient payment flexibility to ensure frequent flyer customers remain loyal.
The pandemic has certainly supported a push for digital and contactless payments, but that push may be reversed as COVID-19 concerns subside, a consumer study conducted by Amadeus and PPRO at the end of 2020 suggests.
“As the COVID-19 outbreak spread across the globe, we knew that we had to examine the impact it would have on the industry and how it could trigger new changes in traveler payment habits,” Bart Tompkins, Heads of Payments, Amadeus writes in the foreword of the study. “We interviewed travelers across the globe who undertook journeys domestically, regionally, and internationally since the outbreak of COVID-19. Our results reveal that an accelerated digital transformation is underway, with many travelers moving away from cash and starting to consider new payment methods…From contending with the impact of technology on travelers’ payment expectations to tackling upcoming regulations, there are numerous trends that airlines, agents, and the industry as a whole should be aware of and consider going forward.”
Some of the key trends they identified in the study include:
- 84% of respondents confirmed that they now pay with non-cash methods like contactless or mobile payments when traveling.
- 14% of respondents say that if contactless payment options are not available, they would abandon the purchase altogether.
- 37% said that the option to pay with non-card methods or e-wallets, was the most important factor when booking a service related to travel.
- 24% of travelers surveyed said that the option to buy now and pay later was an important factor when booking a service related to a trip.
- 37% said that the option to pay with non-card methods such as bank transfer, Apple Pay, or PayPal was the most important factor when booking a service related to travel.
The reasons consumers had for abandoning digital payments in future were also significant and should be considered when revising the payment process. The top reason survey participants gave for returning to cash was wanting to know how much they are spending. Amadeus foresees a possible “backlash against foreign exchange fees and other hidden costs applied at the time of transaction.”
- 55% of respondents said that they plan to return to cash payments when the risk from COVID-19 has significantly reduced.
- 40% of those surveyed said that card payments leave uncertainty over the true final cost
- 32% said cards are ‘too expensive to use’
- 32% also expressed concerns about card fraud.
While many airlines have already eliminated cash as a payment option for onboard ancillary sales, and the pandemic has also stifled and changed onboard service, airlines need to find a way to recover impulse buy revenue on the day of travel. Options like accepting digital wallet payments from the passengers’ own electronic device onboard could help boost sales of food, beverage, premium entertainment content and other travel comforts. Having payment processing integration in the airline app which facilitate last-minute bookings and ticket add-ons, like added baggage fees, premium seating, and flight change fees, or ancillaries like hotel bookings and car rentals will help boost income.
Addressing card use security concerns will also be critical, with airlines already facing refund claims for flight cancellations. According to IATA, “The current range of payment methods has a significant impact on airlines’ working capital; credit card interchange fees alone are averaging around US $8 billion/year, not including charge backs and fraud-related costs.”
IATA’s own IATA Pay solution, which aims to tackle some of these challenges, went live in Germany at the end of March 2021. The UK is the next market expected to go live, in mid-April, with gradual implementation to follow in other markets around the globe.
During the World Aviation Festival, on Friday, April 23, at 2:00 pm UK, Paul Van Alfen, Managing Director, Up in the Air Travel Payment Consultancy, will host the Payments Panel of experts, including Pablo Sanz, CTO, AirAsia; Frank Gubba, Product Manager Loyalty and Payments, Icelandair; Gabriela Baez, Vice President, Digital Transformation, Aeromexico; Simon Chandrami, VP Business Development, Payment Processing Europe, Paysafe; and Chiara quails, Vice President, Market Development, Travel. They will review customer behaviours and expectations during summer 2021 and beyond, and explore how refunds will evolve—offering customers flexibility. The panel will also delve into the trend of buy now, pay later (BNPL) and how it might apply to the aviation sector as a result of Covid-19. Speakers will also discuss the level of adoption of AI machine learning and how it may help prevent fraud; the growth of peer-to-peer payments in aviation; and how har loyalty schemes could be integrated into the digital payment process. Other questions addressed include what the relationship might be with acquirers as the industry is still in survival mode, and how far SCA will drive adoption of biometrics authentication.
Speaking of money, Wizz Air has figured out how to make it, keep it, and encourage customers to spend more of it throughout the journey. On Friday, April 23, at 11:00 am, Bloomberg’s Guy Johnson, will have a Zoom chat with Wizz Air CEO József Váradi, to discuss how the airline has managed to ride the rough winds of this unprecedented crisis. They will review what possibilities exist for future expansion of Wizz Air into other markets, whether the LCC and ULCC models have to change to adapt to this new marketplace, and how airlines can maintain core customer loyalty throughout the crisis.