Airlines have evolved their thinking on digital strategy and are starting to lay the groundwork needed to integrate legacy airline systems with newer travel technology and retail payment systems – especially with the proliferation of mobile wallets and alternative forms of payment (AFOPs).
Some airlines have done this out of necessity, while others are looking at embedding payments into their commercial strategy as a key piece of their digital transformation. In any case, more airlines are now recognizing payments strategy as an urgent business case and approaching payments as a sales enabler within their larger digital and ecommerce strategy.
The Crucial Role of Payments in Driving Airline Sales and Revenue
With over 800 AFOPs globally, and new ones are being introduced frequently, airlines need to be strategic about which payment methods to support. Every payment integration requires resources and must be done right, and without 18-month lead times or freezes on purchasing.
But without the right payment mix, airlines immediately exclude themselves from doing business with users of specific payment methods, and these user bases can be quite sizeable. Apple Pay alone has more than 250 million users while Alipay has close to a billion users. Imagine if airlines were similarly excluded from doing business with AMEX or Mastercard users?
This inability to access local and global markets as well as payment systems hampers startup and low-cost airlines, especially those in emerging and rapidly growing regions such as Latin America and Africa where they’re operating with very basic payment options. Those airlines need payment partners and mobile-first platforms that can expand their payment options quickly and in a flexible, scalable and cost-effective way.
Using Payments More Strategically in Latin America and Other Global Regions
In Latin America, where CellPoint Mobile provides PSP services and solutions to airlines, hotels and transportation companies, many high-value airline customers will be those coming from the US, Europe and Asia where global wallets such as Apple Pay, PayPal, and Alipay are predominant. On the continent itself and in the Caribbean, the majority of travelers will be paying with domestic and regional APMs such as boletos in Brazil or OXXO Pay in Mexico.
Although a true regional carrier has yet to emerge across Latin America and the Caribbean (partly due to the difficulties of doing business across borders in this region), alternative forms of payment have become a default solution for introducing new retail payment systems that aren’t dependent on global banking systems. But in the case of airlines – in all geographies, not just Latin America – payments are still mostly limited to international credit cards or domestic and regional AFOPs with little or no support for global cards or wallets.
The rise and fall of many airlines show how difficult it can be to succeed commercially even with strong capital backing and a competitive route network. These airlines may want to expand their route networks to other geographies, for example, but find it very difficult to compete once they arrive because they aren’t connected to local banks and retail payment systems. This is a competitive disadvantage that is unsustainable and must be solved for airlines in partnership with payment service providers (PSPs), which is exactly what our company is doing.
In fact, we have partnered with UATP to address this challenge and need: make it easier for airlines to offer the relevant payment method to their passengers according to different market needs, creating opportunities to drive higher sales and revenue that were impossible otherwise.
Having a Payments Strategy Creates a Path to Purchase and Profits…
Payments are a crucial sales enabler in a digital economy where fewer people are carrying cash and many are managing multiple credit cards (not to mention points and miles) through a mobile wallet or paying for more everyday purchases with a true AFOP. Other travelers such as those in Latin America or Africa are using mobile money services to make travel payments and bridge the gap between cash and ecommerce. But they can only do business with airlines that understand their unique payment needs and support them with alternative forms of payment specific to their region.