Disbursements

How Digital Vouchers Give Budget Airlines A First Class Upgrade

With all the #KillTheCheck talk here in Disbursements Tracker land, let’s consider the clunky cousins of the paper check — the physical voucher. Long a fixture of the airline industry, vouchers seem to also be slowly taxiing toward obsolescence in the digital age.

As Ingo Money CEO Drew Edwards recently noted in a conversation with PYMNTS’ Karen Webster, there are problems stemming from the ways airlines compensate passengers for inconveniences like overbooked flights. Existing voucher systems are riddled with headaches, and consumers can be frustrated by limitations — like how vouchers can be used — and often have to keep track of the physical paper copy.

That can be a tall order because “some [airline vouchers] end up in the washing machine,” Edwards said.

To address some of these common pain points, European budget airline provider Ryanair is attempting a new approach to the airline voucher model. The company, which offers 2,000 daily flights between 33 countries across the continent, recently announced a digital airline business voucher program with which employers can reward employees. A news release announcing the program indicated vouchers can be personalized and are available in denominations ranging from 10 to 500 euros (the equivalent of roughly $12 to $592 USD).

PYMNTS recently spoke with Matthias Wenk, Ryanair’s marketing operations director, about how the digital voucher service can offer greater flexibility to both the airline and its customers — and how it’s helping to “cut out the middleman.”

 

Digitizing the Travel Voucher

When asked if it was time for the airline industry to #KillTheVoucher, Wenk replied with a definitive “yes.”

“At the end of the day, the physical gift card represents a cost on our industry, and there is not space for that,” he said.

From his European airline industry observations, Wenk said the role of physical airline vouchers and gift cards are in rapid decline. That’s because physical vouchers and gift cards carry additional costs for the low-fare travel industry — costs that are ultimately felt by consumers.

“In a low-margin industry as we are in, you don’t have the margin to cover the cost of a physical gift card without passing it on to the customer,” Wenk explained. “[This] in turn [makes] the proposition less attractive.”

Wenk added that eVouchers or digital gift cards can bypass this dilemma for customers.

“The digital gift voucher can be produced and allocated without any cost incurred,” he said.

Adoption of digital airline vouchers would follow the digitization of other physical airline products for cost-saving purposes. In 2008, the global airline industry shifted away from physical to electronic tickets. According to the International Air Transport Association (IATA), a trade organization representing 275 global airline companies, the shift from physical to digital tickets saves the industry $3 billion USD each year.

 

End of the Gift Card “Middle Man”?

According to Wenk, Ryanair’s digital voucher program provides the company with another avenue to reduce costs. The airline is often approached by companies that provide employee benefits and are seeking to include airline gift vouchers as part of their benefits portfolio. These agencies charge providers like Ryanair between 5 and 10 percent for their services, he explained.

By offering digital disbursement solutions for the travel vouchers, the airline can also connect with its business customers directly, sidestepping the costs associated with using an agency to offer the voucher products.

“From our perspective, it’s cutting out the middleman,” Wenk said. “We’re a low-margin market, and we can’t afford to pay someone in between to dispense the pay and the benefits.”

The voucher market also represents an opportunity to promote the Ryanair brand. In many European countries, businesses can gift employees non-cash benefits up to a certain value, and the gifts are exempt from income taxes. In Ireland, for instance, companies can offer vouchers valued at up to 500 euros per employee. Wenk said the convenience of having access to a digital payment product for travel and the offer of tax-exempt funds make gift vouchers an attractive choice for employee rewards.

While offering digital voucher tools is intended to provide greater convenience for both the airline and its travelers, various European markets present different challenges.

“Each market has adopted different payment tools,” Wenk said. “[For example], while the U.K. and Ireland have embraced digital payment tools to a very high level, the German-speaking region is still much more based on offline payment methods.”

Wenk explained that digital-first solutions like Ryanair’s vouchers will need a “cultural fix” to overcome challenges posed by markets like Germany. But, overall, he envisions a time when digital vouchers and eGift cards surpass their physical predecessors.

 

Future Flight Plans

Ryanair has been a pioneer in Europe’s budget airline market since 1992, when the European Union deregulated the European airline industry, giving airline companies greater flexibility to operate services between other EU nations. Additional players have since emerged to offer cheaper flights across Europe, including easyJet and Wizz Air.

Although the market has become competitive, Ryanair claims on its website to have already transported 129 million customers in 2017. Wenk noted it plans to expand its services to accommodate roughly 200 million customers by 2024.

To move ahead with those plans, he explained it will become important to encourage broader adoption of digital travel vouchers across Europe. That means growing the airline’s base of business partners to reach a wider pool of travelers.

“Our hope is this product needs to completely enter the industry,” Wenk said. “Our hope is to establish relationships with a lot of corporates with massive demand for air travel gift vouchers as part of their reward schemes.”

Looking ahead at the airline industry, Wenk anticipates that physical vouchers and gift cards will likely go the way of those do-not-fly aerosol cans, liquids and gels.

“It’s safe to say that in the near-term, even gift cards will move out of their physical space,” Wenk said.

Regardless, the anticipated industry trend is likely to spare more than a few travelers from accidentally laundering those increasingly antiquated paper vouchers.

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