The busiest days of the travel season are in sight.
Millions will trek to their families, possibly grumbling all the while as the holidays fast approach. Millions of corporate road warriors are embarking on their final sprints toward drumming up new business, maintaining current clients and boosting employers’ top lines.
Time to think about how we take to the skies and how consumers will pay for it.
POS Financing Gains Ground
In a Topic TBD interview with Universal Air Travel Plan (UATP) CEO Ralph Kaiser, the executive told Karen Webster that among the trends gaining traction with airline merchants is the emergence of point-of-sale (POS) financing. UATP exists as the oldest payments network in the world, having been in service for more than 83 years and serving the global air travel market exclusively.
Paying for tickets — which can, depending on the season and destination, cost thousands of dollars — over months can certainly render them more affordable. Kaiser told Webster that POS financing may prove especially appealing in “less developed countries, where there's not as much availability of credit or credit cards, [and] where there are more cash transactions. It's probably going to add a greater population to the traveling public, and that means more people are going to access air travel.” He stated that POS financing will not displace other forms of payment, but should lead to accelerated activity in the coming years across corridors, such as Central and South America, the United States and Canada.
As for the conduits to that financing, he said, noting PayPal Credit and other partners, instant credit check and review — with tailored offers — “might bring people, who otherwise might not take a big trip, to be able to do it.”
The Mechanics And Risk Of POS Financing
Of course, air travel is a commitment and risk that remains unique to finance providers. After all, trips are booked months in advance and can be tweaked, changed drastically in terms of the detail (destinations and days) or cancelled outright.
Kaiser explained that the first payment is charged when the trip is booked, and “the airline will receive its funds. So, it is the providers taking the risk, because they are underwriting the risk of the loan.”
He noted that, in determining this financing, the underwriter reviews the services being booked and takes note of the device being used — perhaps a penthouse that might be financially out of reach is being put on a card. “If they cannot afford this, it will all be factored and decided whether it is a good risk or not. It is a more holistic way of viewing your customer than just the traditional credit score,” he told Webster.
Alternative Payments Now Preferred Payments
In discussing the embrace of alternative payments, Webster noted that offerings such as Alipay and WeChat Pay have hundreds of millions of monthly active users (MAUs). There exists a significant number of travelers who want to take trips outside of China — and, of course, bring with them significant opportunities for commerce into the countries they visit. The alternative payments they wield are being accepted at UATP partners, said Kaiser, who stated that “we link Alipay to the global airline industry” and “we are seeing the alternative brands being picked up. One of the issues is convenience, and also that trust is a big factor.”
Kaiser noted UATP's position as a neutral agnostic player that connects payment methods and brands to airlines across any market the latter chooses, adding that newer entrants like Amazon Pay are also likely to gain visibility.
Simply put, he said, these alternative payment methods are fast becoming how consumers believe they should pay and, more importantly, how they prefer to pay. Kaiser said alternative payment choices offer a win-win situation for the airlines because they are less expensive for merchants to accept and “we find giving people options is a better way for airlines [to] enhance revenues ... than by simply giving a credit card option.” He noted that, in markets such as the European Union (EU), the efforts to cap interchange fees show a drive to bring down costs to the merchants.
In short, consumers want to use the method that is convenient for them, and they already have a range of choices in how and where they book airline travel in the first place. Kaiser said airlines have a vested interest in steering customers to the airlines.com site, where bookings and payments can be made directly — and offering alternative ways to pay can help cement that activity.
Trends In Corporate Travel
Beyond the move toward alternative payment offerings, other trends are afoot. Among them, said the CEO, are innovations that allow for corporate travel managers to get negotiated rates from airlines. Using the rails provided by UATP means that there can be savings realized by all parties of the transaction.
“There is a drive on both sides of the equation to take out some additional costs,” he said. Airlines pay many fees to multiple providers for an array of services. The traditional interchange and merchant service fees have been relatively high, measured against the cost of an airline ticket.
Kaiser continued, “And so, airlines are starting to have conversations with corporate travelers and corporate travel managers about ‘if you can do things to take some of that cost out by booking through preferred channels or preferred provider[s], or use my preferred form of payment, then I can share some of that savings with you.’”
There are two ways to share that savings, he told Webster. Savings can be in the form of a rebate, but what most corporate travel managers are thinking about is whether they can get a discount off the fare, especially if they do a lot of business with a particular carrier. In this case, they can get non-published discounted fares. He stated that commercial card programs are on offer for profitable companies with solid economics, and that some of the existing relationships (when it comes to corporate travel activity) can be rationalized even further in the form of mutual benefit — and can even stave off regulatory tinkering by dint of showing proactive economics that help end users.
Though the bottom line is always a big driver, the direct relationship fostered by UATP between the corporate travel manager and the airline can allow for other benefits, such as pre-boarding, lounge access or waived bag fees. “If you bundle that kind of thing with the discounted fare for using the UATP issued card, that can be a powerful loyalty tool,” he said.
Friction In The Process — Solved?
Beyond payments, there is friction for corporates around reconciliation, Kaiser said. Some of the alternative payment brands may not understand the uniqueness of how airline tickets are sold. There can be change fees or refunds involved, so backing that transaction out of the system toward back-office reconciliation is not always easy. He said some of the payment systems for airlines might also be older than would be seen elsewhere.
Blockchain is among the technologies being considered by UATP, said Kaiser, to take out some of the friction on the processing side via smart contracts. Everyone who ties into that contract cannot manipulate data, and changes to itineraries or scheduling are updated instantly.
However, “blockchain is not going to make your flight not get delayed,” he said, tongue-in-cheek.
Headed into a peak season for consumer travel (and where corporate travel may taper off into the holidays), Kaiser said the company has seen record numbers of travelers in as many as seven of the past nine months. “So, I would say the travel business, with regard to airlines, is fairly strong right now,” he told Webster.