By Vojin Rakonjac, Head of Payment Solutions, Voyego
Airlines have complex payment processes that occur through various sales channels, devices, countries, currencies, payment instruments and intermediaries. Similar to flights themselves, payment data has a long way to travel until it reaches its destination. It is passed from customer to airline, from airline to 3rd parties and corresponding payment processors, and finally, funds are transferred to the acquiring bank. Behind every transaction, there is a delicate orchestration of steps and routes that the payment must take. Every decision on this route directly impacts an airline’s revenue, where an ineffective turn represents an additional cost.
Optimizing payment infrastructure and preventing revenue loss means removing barriers that affect both customer experience and the airline’s bottom-line. Customers are interested in financial paths of least resistance, which includes short and familiar processes, removing friction at checkout and enabling a payment method that reflects customer preferences. On the other side of the process, an airline needs to guarantee safety and cost-efficiency, namely by honouring regulations such as PCI, preventing fraudulent activities and guaranteeing connectivity to processors that enable better acceptance rates and lower fees.
Payment barriers that directly impact revenue
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 throughout all sales channels. For example, when Finnair introduced Alipay for in-cabin payments, sales increased by 200%.
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. If there is technical downtime with either the airline, processor or the acquirer, a customer will abandon the payment and most likely won’t return – another example of an uncompleted payment and lost revenue.
How do you make a safe payments path?
Firstly, you need to take care of potential fraudsters. It’s proven that the airline industry loses $1.4 billion per year just on fraud. Different PSP’s 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.
What about data hijackers? These will wait at all crossroads where airlines exchange sensitive data with business partners and providers. PCI regulates these paths, but it is an airline’s responsibility to make them safe. If a data hijack occurs, this can result in a hefty fee and a reliable way to prevent this is for an airline to partner with a tokenization provider. Tokenization providers enable airlines to pass sensitive data to partners through their gateways, taking full financial liability in case of stolen data. They not only guarantee liability in the case of fraud, but they provide more cost-efficient Card Data Vault than PSP’s.
How to build a cost-efficient payments path?
The first step is to make sure you have alternative routes. If there is a barrier and a payment can’t be processed, make sure you have a way to retry with another processor. If not, everything stops until this is resolved. When choosing a PSP, remember that not all PSPs are equal. Some PSPs can offer better acceptance in specific regions or better commercial agreements than their competitors. The “Toll” that you pay will be different depending on the route you take. Also, make sure you have proper acquiring. 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. You can choose how much volume you will direct towards which Acquirer or processor based on the fees they offer.
How to avoid write-offs?
Even if payment instructions are sent and the payment is processed, the journey doesn’t end there. You need to make sure that nothing is lost along the way. This means that all the 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 that these mismatches will occur. This is simply because there are more contracts, more fee types and more documents that someone needs to cross-reference. If this process is manual, chances of mismatches increase even further. Having fees configured according to commercial agreements enables you to track and catch any changes automatically. Airlines should store as much transactional data as possible to be able to map it later more precisely. Having an automated engine that will collect different types of reconciliation reports and automatically mapping them to internal financial records lowers the number of write-offs and ensures that airlines pay only their obligated fees.
What to do with an optimised payments infrastructure?
Once you have a friction-free, safe path that is both cost-efficient and transparent, airlines can work on their cost-optimisation strategies. Here, you need to think of who can guarantee better deals for specific countries or regions as well as who will enable better acceptance rates. Airlines can gather all the offers and work on a configuration that will be more efficient than what is currently offered. Here, it is crucial that airline has a way to simulate the impact of contract changes without any IT involvement. By simulating new environments and tweaking payment paths, airline can understand how additional revenue can be collected through more acceptance, lower fees and less write-offs.