The airline industry, in conjunction with Deutsche Bank, is trying to challenge credit card companies with a new digital payment system to purchase plane tickets.
According to a report in the Financial Times, the real-time electronic payment system is being designed to save the airline carriers billions of euros in transaction fees. The payment systems, which will enable travelers to purchase web-based tickets, will be rolled out in Europe starting toward the end of this year. The Financial Times reported that Germany will be the first market to get the service.
“We are developing an industry-wide payment solution that is an alternative to credit cards,” Javier Orejas of the International Air Transport Association told the FT. The International Air Transport Association says the airline industry combined pays $8 billion a year in payment processing fees. Visa and Mastercard typically charge 1 percent to 3 percent in fees, noted the report. The system that is being created by the International Air Transport Association and Deutsche Bank will have fees that are fixed and will be a “matter of cents,” the FT quoted Orejas as saying. The report noted that thanks to new regulations in the EU that require banks to share account access information with third parties, the new payment system is possible. Under the new system, the customer would add their payment method and enter bank account information, which Deutsche Bank would check in real time to ensure there is enough money, collect the fee and transfer it to the airline.
“Most banks view this in a defensive manner and only reluctantly open their data,” said Shahrokh Moinian, global head of cash products at Deutsche. “For us, it’s an opportunity for change. We have asked ourselves: Why can’t we behave like a tech company?” Orejas noted that the trade group and Deutsche are in talks with large airline carriers and that there is a lot of interest among the airline companies.