The way people travel is beginning to change with airlines adjusting to the realities of serving customers as lockdowns begin to ease and borders start to reopen.
How the industry receives and administers payments is also changing as airlines navigate the COVID-19 pandemic. Right now, there isn’t a travel business on the planet that can afford to lose a sale.
Here, we outline five areas to help airlines prepare for recovery.
Explore new models for working with acquirers
One of the most challenging areas for airlines has been the relationship with their acquiring bank(s), whose job it is to process card payments while also managing the risk and liability that could arise from an airline going out of business without delivering services to the traveller.
Acquirers are struggling to form these judgements in unprecedented times when their existing risk models have become inadequate. In certain circumstances, this has led to airlines only receiving funds from their acquiring bank(s) when the flight has been flown.
Some acquirers do this to ensure a traveler can get a refund if the service isn’t provided, as stated by scheme regulation.
We believe the entire industry must agree on a new, more transparent risk framework involving real-time data sharing. One that reassures acquirers and travelers, while ensuring airlines can access the liquidity they need.
Maximising free cash flow in a risk-laden environment
In an environment where acquirers are increasingly risk-averse, it will likely take longer for airlines to receive funds. In this context, there’s potential for carriers to incentivise customers (e.g. discounts, extra miles/points) to pay with methods where funds flow directly to the airline, without the need to pass through an acquirer.
Such methods include bank transfer payment methods or “instant payment” such as Trustly, Klarna or SEPA transfers.
From a consumer perspective, it’ll be interesting to see whether travelers will be receptive to a payment method that offers less protection than their traditional payment cards.
Reduce risk and increase efficiency in B2B payments
Before COVID-19, some airlines had been pushing back against virtual card payments from agencies on cost grounds.
Given the current circumstances, airlines have even more reasons to accept virtual card payments as they provide reliable and near-instant cashflow at a time when this is critical for carriers.
This payment method also offers both sides protection against default, so if travel agency were to default on the payment, the airline would still receive the funds, thanks to payment cards’ in-built payment guarantee feature.
Deliver a friction-free payment experience that captures every possible sale
Now, more than ever, travel merchants do need to make it easier for travelers to make payments. Here are a few simple payment experience optimisations that many airlines could deploy quickly:
- Display only relevant payment methods: If a European traveler is shopping, and a travel website only displaysAliPay but not PayPal then it’s immediately much harder for the trav-eler to make a payment. Subject to local laws, this can easily be improved by displaying the payment method the traveler is most likely to use based on their geography and previous payment preferences when making bookings.
- Optimise for mobile: many airlines still translate their payments checkout experience from the desktop and ask travelers to use it on a mobile. Clearly mobile screens are smaller and require an entirely different experience that prioritises convenience and fewer steps.
- Reduce steps: How many steps, clicks, keystrokes does it take for a traveler to pay an air-line? Whatever those numbers are, there should be a continuous stream of work to reduce them e.g. do you still ask customers to scroll through alphabetical months and years to add a card’s expiry date?
Monitor payment flows and adjust business rules to optimise results
For airlines, monitoring key payments metrics such as acceptance rates (where payment is authorised and subsequently accepted to proceed) can highlight problems down to the individual country, banking partner or transaction value ranges. By monitoring, adjusting and reporting an airline can secure significant marginal gains.
- Optimising every possible sale: As travel begins to resume, it’s increasingly important to con-tinually reassess what matters most. In terms of maximising sales conversion, airlines should look more closely at measuring acceptance rate by market, by price range, and by the class of travel to ensure that conversion rates are optimised and fraud checks are tailored to every possible dimension.
- Tackling high-value fraud: Airlines can monitor payments at a very granular level. For example, it’s possible to apply the 3D Secure protocol, that insists on two-factor authentication in its latest guise, for bookings made on a mobile phone and which relate to flights from specific airports where a high risk of fraud is known.
- The cost of customer acquisition: If a customer doesn’t complete payment on the airline web-site, did they then move channels to complete their booking with a travel agent? Or perhaps via the call centre? Or did they leave to book with a competitor? By effectively following a payment, airlines may learn that a customer paid at the contact centre which incurs a significantly higher interchange cost because it is deemed an inherently less secure channel, pushing up the overall cost of sale.
At a time when resources are constrained and every penny counts, airlines have an opportunity to look again at how they take payments.
Adjusting strategy on payments is a comparatively modest investment that can have a near-immediate impact on the bottom-line, and our teams remain on hand to offer guidance, advice and best practise support.