A study of 56 global airlines concluded that payments for transactions via a mobile device are now an important focus area for air carriers, with nearly 60% of participants saying that mobile has the greatest potential to drive revenue over the next two years.
The conclusions, from a white paper by airline settlement and payment company WorldPay based on research conducted between May and July of this year, reflect a traditional industry that still strongly relies on credit and debit cards and airline miles for payment, but is experiencing consumer demand for alternative payments including mobile. The research examined drivers for adoption of alternative payment schemes, and the top reason cited by airlines was meeting customer demand and offering choice (89%). The second most popular reason, cited by 64% of participants, was the potential cost savings to be made when customers use alternative payment methods rather than credit cards.
Key findings included:
- Traditional payments still rule. The top payment methods accepted by airlines in 2013 were credit cards (96%), debit cards (64%), airline miles or loyalty program points (54%) and e-wallets (38%).
- However, that is expected to change. More than 30% of the participating air carriers planned to offer mobile payments in the next two years, and 29% were also considering e-wallets and online bank transfers as payment methods to develop.
- More incentives are being offered to customers who don’t use credit cards, with 86% of airlines offering discounts or rewards to customers using alternative payment methods, up from 55% in 2012.
- The benefits of multiple payment options were seen as reaching new customers (63%), lower payment processing fees (61%), and lower rates of fraud (50%).
“Airlines have recognized the revenue opportunities of mobile, and are now focused on improving their mobile offering, ” said Mike Parkinson, VP of airline for WorldPay. “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.”
Parkinson added that there are currently more than 230 payment methods available worldwide.
However, air carriers see significant challenges to implementing payment alternatives, including integration with current systems and processes and the cost of implementation. Still, a large majority — 88% of participants — believe that enabling alternative payments is critical for revenue growth.
“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 of e-payments for airline 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.”
