worldpay alternative payments for airlines two

8/10/2019 Worldpay Alternative Payments for Airlines Two

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Alternative Payment and Distribution Landscape:

Airlines and Alternative Payments - The Facts


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www.worldpay.com www.worldpay.com 1

About thiswhitepaper

WorldPay, a global leader in airline

payments and settlements, has

created theAlternative Payment

and Distribution Landscape: Airlines

and Alternatives The Facts

whitepaper exploring the results of

a research study of 56 global airline

carriers looking at the motivations,

trends and future plans for offering

alternative payments.

This whitepaper comes after part one in this whitepaper

series that looked at the developments in alternative

payment solutions specific to the airline industry,

and the challenges currently facing carriers.

A third whitepaper will bring together the results of

research on 42 airline carriers identifying their current

challenges and trends facing carriers in developing

distribution channels.

Methodology

WorldPay carried out a global online survey among

industry professionals from 56 airline carriers from

low cost to traditional. The sample consisted of

contacts held by Airline Information, an established

leader in commercial aviation conferences. The research

was conducted between May and July of 2013.


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WorldPay offers airlines a

full payment service and risk

management solution across all

global distribution channels.

Providing payment coverage in 181 countries,

WorldPay helps airlines connect globally, supporting

the widest choice of payment types and currencies

achieved from a single integration.

WorldPay manages payments for 70 airlines globally

including some of the worlds largest aviation brands.

Mike Parkinson, VP Airlines, WorldPay

Mike Parkinson is the Vice President of the Airlin e

Sector at WorldPay. Mike joined WorldPay in 2000,

and has held various senior positions including Head

of Partnerships, and Head of Global Corporate Sales.

More recently, Mike has been responsible for looking

after the Airline Sector, where WorldPay has an

established portfolio of payment processing,

fraud and settlement services.

About WorldPay


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In part one of this whitepaper series,

we explored the developments in

alternative payment solutions specific

to the airline industry, which has a

number of unique characteristics.

By the very nature of what airlines do, the sector

must operate on a global scale, whilst considering

local factors including the prioritisation of distribution

channels. From the availability of smartphones and

hence the access to mobile payment methods to

local infrastructure considerations, each region

has a number of unique challenges.

Globally payment preferences vary hugely ranging

from real-time bank transfers to offline credit transfers;

from direct debits and e-wallet payments to paper-

based systems and payments by mobile applications.

It is estimated there are more than 230 methods of

payment available around the world. Yet the airline

industry still heavily relies upon credit cards as the

primary payment method.

One of the main factors for this is the complexity

and cost associated with implementing alternative

forms of payment. As a result, airlines need to work

with a provider of payment services that understands

those challenges and is prepared to design specific

solutions for this industry with reliable service levels.

With a fast-moving landscape, airlines are increasingly

looking to implement locally preferred systems of

payment, which in turn will drive the development of

solutions. In order to be truly global, airlines n eed to

respond to local requirements to be able to maximise

their revenue potential and to serve their customers

and win new customers.

Introduction


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www.worldpay.comwww.worldpay.com 7

Contents

About this whitepaper 01

About WorldPay 03

Introduction 05

The alternative payment landscape now 09

Drivers for growth 10

Motivations for offering different payment types 13

Optimising revenue 15

Benefits of offering alternative payments 16

The challenges of offering alternative payments 18

The future 21

Conclusion 23


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Credit cards, charge cards, debit

cards and air miles/loyalty points

remain the top payment methods

accepted in the airline industry.

However, a shift has taken place since last year.

In 2012 WorldPay conducted research of 51 airlines

to create the Perfect Passenger Payments report. In

comparison to the research in 2013 traditional payment

methods have slipped, with alternative methods gaining

ground. Whilst the acceptance of credit cards remains

the primary payment method, the use of credit cards

declined by 4% between 2012 and 2013.

Debit cards also lost some ground, with 64% now

accepting them as a form of payment compared to

67% last year. Offline bank transfer usage also

appears to be on the decline: last year, 25% of

respondents accepted them; this year thats down

to 8%. Direct debits and cash vouchers declined, too.

So what gained ground this year? Mobile made

a significant leap and is up 150%, with 25% of

respondents this year saying they accepted mobile

payments, an increase from just 10% last year.E-wallet payments also gained acceptance: up from

33% last year to 38% this year. Prepaid cards were

also accepted by more respondents this year

13% now, up from 8% in 2012.

Air miles and loyalty points grew in popularity: this

year 54% of respondents said they accept them,

up from 45% l ast year.

The alternative paymentlandscape now

Air miles / loyalty points / FFP

Alternative payment method acceptance:

2012 45%

33%

10%

54%

38%

25%

2013

E-wallets

2012

2013

Mobile payment

2012

2013


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Airlines need to consider where the

demand for using alternative payment

methods is coming from, and focus

their efforts accordingly. There are a

number of key markets which require

an alternative payment strategy.

Germany, with its well-developed e-commerce system in

place, is a global leader in alternative payment adoption

with alternatives making up 66% of a total e-commerce

value of 45 billion. 14% of respondents say this

market is driving demand for alternative payment

method implementation.

China is also driving demand for alternative payments

8% of respondents report that this is the country driving

greatest demand.

With a population of 1.35 billion and a growing middle

class that is increasingly accustomed to foreign travel,

the Chinese are fast becoming the worlds biggest

spenders on international tourism. The Netherlands

and the UK come next, forming the largest pockets

of demand for 6% of respondents.

Perhaps unexpectedly, Russia, despite having a varied

landscape when it comes to payment methods, was

cited by just 3% of respondents as driving the demand

to provide alternatives to credit and debit card, although

just 1% of respondents said Russia was their largest

market.

Traditional payment mechanisms continue to be popular

in more mature markets, but other regions - such as the

BRICS nations - are seeing strong growth in alternative

payments creating demand for a more diverse payment

portfolio. Airlines need to consider specific factors such

as payment method preference, device penetration and

country telecommunication infrastructure when looking

to implement an alternative payment strategy.

Drivers for growth

Germany

14%China

8%Netherlands

6%UK

6%Brazil

5%Holland

5%India

5%Mexico

3%Russia

3%Argentina

2%Bahrain

2%Canada

2%Finland2%

France

2%Hong Kong

2%Italy

2%Phillippines

2%Singapore

2%Spain

2%

Countries driving demand for

alternative payment methods


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61%

What are the reasons for using

alternative payment methods?

The key reason cited is to meet

the demand of customers by offering

them a choice: 89% of respondents

said this was the most important

reason. However, alternative payment

methods can also reduce costs and

thus increase revenue, according

to 64% and 59% of respondents

respectively.

The global nature of airlines is flagged up by 23%

who said that fitting in with cross-border expansion

plans was a reason they were offering alternative

payments, while 41% cited keeping up with competitors.

Importantly, the acceptance of alternative payment

methods is also a key differentiator between airlines,

say 61%.

Motivations for offeringdifferent payment types

To t in with cross-border expansion plans

23%

To keep up with competitors /other airlines

41%

To increase revenue

59%

To reduce costs

64%

To meet customer demand / oer choice

89%

61% agree thatthe acceptance ofalternative paymentmethods are a majordifferentiator betweenairlines

Motivations for offering alternative payment methods


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A key theme that emerges from the

survey is the growth in mobile usage

and the potential it offers airlines.

57% said that mobile is the method

that has the greatest potential to

drive revenue over the next two years.

In second place, e-wallets are seen as having the

potential to drive revenues by 48% of respondents,

with the debit card in third place, cited by 43%.

Interestingly, 20% see frequent flyer points as a

driver of revenue growth, coming behind charge

cards (30%) and online bank transfers (36%).

Prepaid cards have yet to take off: just 13% said

they were likely to drive revenues, while direct debits,

cash vouchers and offline bank transfers occupied

the bottom three slots.

It is clear with the growing trend of direct sales for

carriers that managing direct customer interaction

and payments together will become a priority in the

future: 32% of respondents said they plan to accept

mobile payments in the next two years.

Optimising revenue

Frequent yer points

20%

Charge card

30%

Prepaid card

13%

Bank transfer online

36%

Debit card

43%

E-wallet

48%

Mobile payment

57%

Credit card

57%

The payment methods that have the

greatest potential to drive airline revenue

in the next two years


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Airlines are very aware that a

choice of payment methods can

help drive business. Not only do

they acknowledge that alternative

payment methods can help them

reach new customers (63%), they

also point to lower processing fees

(61%) and a lower fraud rate (50%).

Additionally, a wide choice

of payment methods can help

airlines differentiate themselves

to potential customers and also

help drive customer loyalty, said

39% and 38% respectively.

A key challenge for airlines is the abandonment

of bookings during the purchasing process due

to customers not being able to use their preferred

payment method, or because their card is declined.

Not surprisingly, 34% of airlines said reducing booking

abandonment is a benefit of offering alternative methods

of payment.

Other benefits include a higher conversion rate,

according to 21% of the respondents, and improved

process automation (20%) as well as a higher

transaction value (11%).

Winning and pleasing customers is a key motivator for

airlines: when asked what reasons they give for offering

alternative methods of payment, a big majority 89%

said they would do so to meet customer demand.

Reducing costs for the carriers is also important, with

more than half (64%) citing that as a reason.

Given the benefits to carriers of offering a range of

payment choices, it is unsurprising to find that many

pass on those benefits to their customers in the form

of incentives: 39% of carriers who responded to the

survey said they use incentives, which is si gnificantly

up from last year, when only 22% offered incentives.

Of those incentives, 86% of respondents offer discounts

to customers thats up significantly from 2012, when

only 55% said they offered discounts.

Benefits of offeringalternative payments

61%63

%

50%

Ability to

reach new

customer

segments

Competitive

differentiation

Higher

conversions

Lower

payment

processing

fees

Customer

loyalty

Improves

process

automation

Lower fraud

rates

Lower

shopping cart

abandonment

Increase in

average order

value

39%

21% 20%

11%

38%

34%

Benefits of offering alternative payment methods


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The survey also highlights that

alternative payments raise

challenges for airlines too.

One of the key issues of adding further methods

of payment is integrating those into current systems:

73% of airlines cited this as a challenge. The cost

of implementation (39%), fraud risk (32%) and lack

of knowledge/ resources (32%) are secondary barriers.

Despite these issues, gaining internal consensus

to offer a choice of alternative payments is only seen

as a challenge by 7% of those surveyed. This perhaps

indicates that for most airlines the upsides of creating

an optimal payment mix far outweigh the challenges

of implementation. However, further education is

still needed with 18% of respondents saying that

the benefits of offering different payment methods

are unclear.

With mobile payments set to take such a central role,

another issue for airlines is security and the

risk of fraud across existing and new channels.

The challenges of offeringalternative payments

Lack of integration

with current systems

and processes

Selling in to the

business internally

Fraud riskCost of

implementation

Lack of knowledge /

resources

73% 7%32%39% 32%

The challenges of offering

alternative payment methods


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In the future, airlines have a defined

strategy for the types of payment

methods they plan to offer.

A third (32%) of those surveyed said they plan to

accept mobile payments within the next two years,

whilst 29% are planning to offer e-wallets and 25%

said they plan to accept prepaid cards as a form of

payment. Only 11% plan to offer Air miles or loyalty

points and 9% cash vouchers.

E-wallets and mobile are the primary payment

methods of choice under consideration and

furthermore, we are starting to see some carriers

working on their own methods of payment.

The future

32%Plan to accept mobilepayments within two years

Mobile payment

32%E-wallet

29%Bank transfer online

29%Prepaid card 25%Debit card

20%Direct debit

18%Bank transfer oine

14%Air miles / loyalty points

11%Cash voucher

9%Charge card

7%

Planned payment types in the next 2 years


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Customer demand and offering choice are the two

biggest drivers for offering alternative payment methods.

While customers in more traditional markets are still

happy to use credit cards, emerging economies are

driving the need for a more diverse payment portfolio,

in particular e-wallets and mobile.

Airlines recognise that this will be a major driver of

revenue but also that i t offers a commercial differentiator.

As carriers margins are increasingly squeezed, looking

for new ways to drive revenue is imperative. This is why

airlines are also looking at developing their own payment

methods.

Mobile is clearly an area for growth and again

consumer appetite is playing a key role here. Airlines

are already aware of both the need to develop services

and solutions and the potential revenue opportunities

if they do so, which in turn spurs payment providers

to respond with specific innovations.

Offering the option to pay through mobile phones also

means airlines can reach and satisfy their customers

directly, but as with all the developing payment and

services methods available, the main challenge can be

integrating new systems into their existing infrastructure.

Alternative payment providers need to adapt to mobilefirst so that they can better serve the industry.

Conclusion


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Contact us

www.worldpay.com www.worldpay.com

Phone internationally: +44 (0)1268 500 615

www.worldpay.com/airlines

This document is proprietary to WorldPay. The information

provided herein is provided on an as-is basis for informationpurposes only, and WorldPay makes no warranties of any kind

in relation to the content or suitability. Terms and conditions applyto all our services. WorldPay (UK) Limited is a company registeredin England number 07316500.

Registered office: 55 Mansell Street, London, E1 8AN. WorldPay (UK)

Limited is authorised and regulated by the Financial Conduct Authorityunder the Payment Services Regulations 2009 (Register No. 530923)

for the provision of payment s ervices.

worldpay alternative payments for airlines two

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