UATP CEO Ralph Kaiser On A Single-Use Virtual Card That Bundles Air, Hotel & Car Into One Payment - 25 November 2015
Business Travel News For six years, Universal Air Travel Plan president and CEO Ralph Kaiser has worked to add hotels and rental cars to its merchant network. What began with a partnership with LaQuinta Inn & Suites in 2010 hadn’t gained much traction by 2013, but in August, UATP announced a partnership with corporate payments provider Wex and Delta Air Lines to provide a one-time-use virtual card solution that can package hotel, car rental and air into one payment transaction. Kaiser spoke with BTN’s JoAnn DeLuna about that partnership, why airlines should be wary of global distribution systems’ reach into the payment sector, and digital wallets.
Since your partnership with Wex and Delta, how much interest have you received from other airlines?
Everyone is interested in it and not just in the U.S., either. It just worked out that Delta was able to work with Wex in the U.S. to launch [in the fourth quarter]. Our issuer base is 33 airlines, and the majority of active issuers who have big corporate programs are interested in this. Anytime the airline talks to a corporate and says, “Hey when you book a flight on us, you can also book your hotel and car rental and we put it all on the same statement for you,” they’re going to say, “Sure. Why not do it?” They’ll all add it. We just need to get it into the market.
How will it work?
The Wex model is a virtual card transaction on the MasterCard network. If you use a UATP number to book the hotel when you book your air, that UATP number will flip to a MasterCard and be processed on the MasterCard [network], but the data and transaction information will go back to Delta for the customer’s UATP billing statement.
Does the Wex partnership affect your partnership with virtual payments provider eNett at all?
No. In fact, we always tell all the partners that we’re working with multiple companies on multiple fronts to bring solutions to our members, the airlines. We try to be an honest broker for everybody. Unless someone wants to pay us a lot of money, we’re not going to do an exclusive deal. We’re willing to work with anybody that would like to work with the airlines to bring in corporate non-air and benefit from the UATP customer base of airlines and large corporations.
Wex also partnered with data intelligence company Grasp to launch a virtual card solution, which it claims is free. If it is, why would people use UATP?
I don’t understand how they work out the economics … but companies don’t do things for free. Compared to how it’s traditionally been done and priced, maybe it is free but someone’s paying for it somewhere. Our goal for doing this is not because UATP is going to make profits on the Wex deal. It’s really to make the product better so airlines can go out in the market and solve problems for corporates.
In July, UATP was exploring ways to process onboard purchases, and in September, you announced integration with card management technology provider Givex. How will that partnership benefit the corporate travel sector?
We have some other gift card providers and programs, too, like Air Canada. The cool thing about Givex is that it’s almost like a loyalty program and it can do traditional gift cards, too. But, they also have technology where an airline can reward customers and do things for them. For example, if a traveler is sitting at [the airport] because their flight is delayed. [An airline] can say, “Here’s $20 so you can get a sandwich and drink while your flight is delayed.” You can put it right on the UATP card through the Givex tool. It’s a way to get extra flow revenue through the gift card but also a way to enhance relationships with both corporate and leisure travelers.
There’s a lot of attention on the payment sector at the moment. Why is that? How does UATP see its role in the sector?
Virtual card is the hot thing in payment right now. Also, payment has gotten a lot of attention because, over the decades, airlines have been able to rationalize agency commission costs and have reconciled the GDS costs fairly well. GDSs are now getting into payment. Amadeus has a huge payments group, and there’s eNett and Travelport. [Travelport president and CEO] Gordon Wilson has said his future is in payments. How many heads of GDSs do you hear saying that? Sabre and Travelport recently partnered. All the money that airlines have rationalized and taken out in GDS and airline IT technology savings—[the GDSs] are now going into payment and trying to extract that value back from airlines. The airlines need to strongly consider who their partners are because airlines are in lawsuits with GDSs on the IT side and now [airlines] are going to start handing out business to the GDSs. [Initially, it might be] cheap, and over time it’s going to be very expensive and there will be contract fights. You’ve got the GDS in your IT, and now they’re going to be in your payment. They’re getting more and more tentacles into the airlines. Our company is 100 percent owned by airlines, so we’re trying to educate airlines on what they may be getting themselves into.
The GDS-airline partnerships are interesting. Who owns the data, who’s responsible for keeping the data safe and who’s responsible in the case of a data breach?
Two things work in our favor. One, we work in the business sector, so it’s commercial data, not private citizen data. Those breaches are significant because it’s personal data and liability. Two, we get our data direct from the airlines. We don’t go through other third parties, so all the statement data from the corporate traveler comes directly from the booking, the [passenger name record], and it’s a direct feed to our system to those billings systems, which is the best data, the best source you can get, and it’s the most secure. Of course, we take data privacy and security seriously, but it’s the airline’s data that we process and put on their billings statements.
Where do you store your data?
We don’t really store data, per se. We get data every day in batch transactions. That goes through the acquirer network, which is our proprietary payment network, SITA, an industry-owned tech provider that we run. But we don’t store personal private data. We don’t have it. We have the PNR Level 3 data that we get, [which includes] the name of the traveler, class of service, city pairs, schedule, time, etc. That’s good for travel managers for reconciliation [purposes].
How much data do you want to own?
We don’t have a lot of data issues or questions. We provide all the data from the booking back to the corporate travel manager, TMC or corporate customer through their statement. We run our own proprietary invoicing system for airlines, but some also have their own that’s built into their revenue-accounting system. But in terms of controlling the data, it’s the airlines’ and corporate customers’ data. We don’t do anything with our data except present the customer’s data in a way they can use it to manage their travel. We don’t sell the data. Some companies aggregate and sell data. Some credit card companies buy data from different sources because they can’t get the complete picture in every market. We get it in every market because we’re global, we’re closed loop and we’re directly connected to each airline. We’re integrated in all the GDSs, which I love, except when they try to raise airline costs for payment.
How do you stand your ground when the GDSs come into your territory?
Payment competition—whether it’s from Amex, MasterCard or Amadeus—is good for the industry. It’ll create innovation and lower costs. There are two parts of education to our business. It’s not just being careful with whom you partner but also what you’re paying for it. How much of your business do you want one entity to control? It’s the same reason I don’t buy individual stocks because of companies like Enron. You need to spread your risk. You never want to have a concentration of risk in service providers and customers. If an airline gives the reservation system, IT platform, GDS connectivity, payment and website to one company, you have this concentration of risk. Also, how do you negotiate contracts when someone has all that business? Look what Amex does in the U.S. with payment and agency stuff. Airlines are afraid to cross them on one piece because they know they’ll suffer on the other. The other part is that we bring alternative payment brands to the airline industry—for example, PayPal. We process the transaction on the back end, but the customer doesn’t see it and we don’t charge the airline for that [service] because we’re owned by airlines. It’s part of our service to them. We get a processing fee from anyone who does alternative payments, not the airlines. The GDSs and [payment service providers] will charge the airline. Education is key, as we need to get that message out. If you’re using a PSP, we don’t think the reconciliation is good and we know that the price isn’t as good.
Where is the industry headed?
It’s very exciting. The solutions coming out are important not just for the payment industry but for airlines who are the biggest merchants in the world. Everyone wants an airline to accept their form of payment because they’re big-ticket items. We’re starting to see a bit of consolidation in payments, too, not just in airlines. Again, that’s another control thing. If your options go from five to two and one of those two is a GDS, do you really want to put your eggs in one basket? Companies like PayPal are evolving. They were the leader and the first alternative payment brand, and they did really well because they took fraud seriously when others didn’t. Mobile payment is coming. Apple is there. That’s a sexy brand name. We know what Uber has done in transportation. Uber is a way to pay for a taxi, but you don’t care about the form of payment; you care about the service. People don’t care what payment is embedded in there.
Some of the criticism I’ve heard from buyers is that not enough merchants accept mobile wallets like Apple Pay.
I don’t know how that will be adopted or not, but Apple revolutionized the way we listen and buy music, and now maybe they’ll do the same thing in how we buy things. The other thing on mobile payments is the [International Air Transport Association’s]EasyPay. It’s going to be a new proprietary form of payment, an e-wallet … a way to move cash more securely and quicker in the IATA [business service provider] network, which is a global network and which we’re 100 percent connected to. It’s another innovation in the airline industry that may change things.
Bitcoin could be more to airlines than “just an asset” for exchange - 19 October 2015
Bitcoin could be more to airlines than “just an asset” for exchange
Posted by Luke Parker
to view the article, click here.
The airline industry is a complex, dynamic, and very competitive industry operating in a high-volume, low-margin environment. In order to operate profitably the layers of business systems that underpin it require extreme efficiency and precision, in multiple areas such as reservations, inventory, departure control, and ticketing.
A recent industry report, commissioned by global travel industry IT Provider Amadeus, highlighted many opportunities to streamline financial processes. The report, by leading market research consulting firm Frost & Sullivan, claims that accepting the currency bitcoin can help boost airline revenue, but more importantly, integrating blockchain technology could be “revolutionary” for the airline industry.
“Bitcoin could be much more to airline revenue accounting than just an asset that can be exchanged. The technology behind Bitcoin—the Blockchain—is likely to have a far reaching impact on accounting everywhere. It is essentially a single, extremely secure, transparent global ledger. The network, rather than a third party, validates a transaction. This means that friction (and cost) can be reduced across the network.”
– Frost & Sullivan
The report explains that while airlines have done an admirable job of running extremely lean flight operations, their current financial processes are the opposite. This is particularly true with revenue accounting, where airline management needs timely, accurate and consistent data. “Existing systems using offline accounting files or incompatible file types sometimes take a day to prepare, a day to submit, and another day to process,” states the report.
By integrating bitcoin and the blockchain, transactions would be fast, efficient, and secure. This is in main part due to the open and immutable nature of the blockchain. Every last ticket bought with bitcoin can be tracked by an auditor, through each step of the process, giving them not just a high-integrity total, but an incorruptible paper trail for each payment. Bitcoins’ blockchain is also public, so anyone can access with an internet connection, from anywhere in the world.
“As a CFO myself, I am well acquainted with the everyday issues that my peers in companies around the world face: the need for accurate information that strategic decision-making demands and the ever-greater speeds at which this data is required.”
– Ana de Pro, Amadeus Chief Financial Officer
Adopting bitcoin payments will also reduce fraud. According to the report, credit cards in particular present major problem for airlines, alongside identity and frequent flyer fraud, and the problem is increasing. “Compared to other industries, airlines have a narrow window of opportunity to identify and eliminate fraud.”
“Adapting to new payment methods such as Bitcoin will be a competitive imperative. More fundamentally, Blockchain technology could have a revolutionary impact on accounting by offering a single, secure, transparent global ledger.”
– Frost & Sullivan
While airlines are aware that bitcoin and blockchain can help boost airline revenue, they have been “slow” to adapt to new payment methods, “due to incompatible payment and revenue accounting systems.”
However, accepting bitcoin payment is easy for most airlines, thanks to the low-cost global payment network, Universal Air Travel Plan Inc (UATP), which partnered with Bitnet in February. The partnership aims to drive bitcoin adoption within the airline and travel industries, by allowing more than 260 international airlines to accept Bitcoin payments.
“Our partnership will make it easier for UATP’s member airlines to accept payments in bitcoin via a lightweight integration that avoids impact to downstream systems and leverages existing UATP reporting and refund interfaces. Bitnet and UATP share the same mission of lowering transaction costs and fraud risk for their clients.”
– Akif Khan, Bitnet Vice President of Solutions Strategy
UATP merchants provide 95% of global airline capacity, including many mainstream brands such as British Airways, Lufthansa, Delta Air Lines and Southwest Airlines.
While mainstream airlines have not individually said they would accept bitcoin, the option is clearly available. In the meantime, a small but growing group of airlines and travel merchants have started accepting bitcoin as a method of payments, alongside traditional payment methods such as Visa, Mastercard, and American Express.
Starting the trend, in November 2013, CheapAir announced that it was the first online agency in the world to accept bitcoin as a method of payment for flights. A few months later, the companystarted accepting bitcoin for hotel reservations too.
In that same month, the bitcoin trendsetter and British billionaire, Sir Richard Branson, announcedthat his company Virgin Galactic was accepting bitcoin for its commercial spaceflights aboard SpaceShipTwo.
In June 2014, the leading travel booking website, Expedia, started accepting bitcoin for hotel purchases.
“We’re continually looking at ways consumers want to pay for their travel; bitcoin is a great example of how Expedia is investing early in an array of payment options to give our customers and partners more choice in the ways they interact with us.” – Michael Gulmann, Vice President, Expedia Global Product
In June 2015 a regional Airline from Mexico, TAR Airlines, announced that it had enabled bitcoin payments. A month later, Latvian airline airBaltic started accepting it too. The latest airline to embrace bitcoin, Polish Airlines LOT, started accepting bitcoin in August.
An independent report by leading accountancy and consultancy firm PricewaterhouseCoopers (PwC), “The 2015 Aviation Trends,” suggested that airlines must use “new technology internally to streamline their operations and reduce costs.” The report states that in the commercial aviation sector, while airlines struggle to break even almost every other player turns a tidy profit, including airports, airplane manufacturers, jet engine makers, travel agents, and service companies.
“The airline industry is hampered by slim profit margins, forcing carriers to focus on both cost reduction and revenue growth through better customer interactions.”
– PricewaterhouseCoopers, 2015 Aviation Trends
The International Air Transport Association (IATA) found that direct costs relating to infrastructure, such as using airports and the infrastructure for managing flight traffic, has increased sharply over the past decade. Inefficiencies causing delays and indirect routes also add to these cost.
While the IATA forecasts that total worldwide airline industry will grow 6.7 percent this year, generating revenue of over $760 billion, or 1 percent of world GDP in 2015, profit margins are still razor thin.
Delays caused by inefficient airspace management in Europe alone will cost the industry $2.9 billion in 2015, as well as generating unnecessary carbon dioxide emissions, states the IATA forecast. The time passengers waste in these delays is a consumer cost worth an estimated $4.7 billion.
The security baked into the bitcoin blockchain can also help airlines with some of their major computer security problems, which they’ve recently been experiencing with multiple costly access-based problems.
Southwest Airlines experienced service disruptions last week due to ‘computer glitches,’ and 25 percent of all its flights were delayed, 836 of them at that time. The world’s largest airline, American Airlines, experienced ‘connectivity issues’ last month, delaying 525 flights, and cancelling five.
The current ticketing system is also unsecured, with boarding passes containing a variety of personal and private information. An alarming report from computer security expert Brian Krebs found that anyone, even without any hacking knowledge, could access and control a passenger’s entire account, changing seats, cancelling future flights and resetting pins, with just a boarding pass.
“The next time you’re thinking of throwing away a used boarding pass with a barcode on it, consider tossing the boarding pass into a document shredder instead.”
– Brian Krebs
With a little digging effort online, the passenger’s frequent flyer number can also be obtained, as well as personal information on anyone using that frequent flyer number, including the person booking the flights.
With flight delays, cancellations and security risks, just to name a few, customers are understandably unhappy with airlines. A national independent index, the American Customer Satisfaction Index (ACSI), reported that airlines still remain one of the poorest performers, ahead of only internet service, subscription television, and health insurance. An independent report by IBM agrees that airlines consistently ranks very low for customer satisfaction.
The Frost & Sullivan report also suggested that the airline industry could improve their financials by learning from other industries, specifically retail and banking. The players in these industries, including the Swiss mega-bank USB, UK global bank Barclays and Overstock.com, have done plenty of research on blockchain technologies. In time, the airline industry can learn how to benefit from integrating the blockchain into the airline’s multiple systems, and potentially change the way consumers think about the airline industry as a whole.
Business Travel News: UATP Partners with WEX - 7 August 2015
Business Travel News: UATP Partners with WEX
UATP has partnered with corporate payments provider WEX to provide UATP clients a one-time use virtual card solution for hotel and car rental. Delta Air Lines is projected to become UATP’s launch issuer later this year. “We’ll be able to connect through our partner with hotel and car rental so the whole trip can be put on UATP,” vice president of marketing and communications Wendy Ward told BTN. In April, Wex expanded its virtual payment offering to 11 currencies for its European customers. UATP also is exploring ways to process onboard purchases, such as gift cards or providing users images of the virtual cards, Ward said. “We’re trying to really expand the use of the network, and onboard [purchases] is one that’s come up. We’re not there yet, but we’re thinking about it,” she said. “We’ll never be a traditional walking card, but if it has something to do with travel, we want to explore it.”
To view the article, click here.
Easier Payments, Less Cheating - 22 July 2015
Easier Payments, Less Cheating
Low Cost & Regional Airlines Magazine
Every business has to make arrangements for easing purchases by customers, while at the same time ensuring customers do not cheat or defraud the business. But with airlines, both challenges are a little tougher. Carriers sell in so many different markets, and payment tools can differ in each. And frausters are a wandering tribe, attracted especially by travel.
To continue reading this article, visit pages 37-40 here.
UATP Receives 'Best Travel Payment Platform USA' Award - 15 May 2015
UATP Receives ‘Best Travel Payment Platform USA’ Award
Best Travel Payment Platform – USA
The 2015 Business Excellence Awards are all about identifying and honoring the most respected companies and their C-level executives, while recognizing and rewarding outstanding performance, success, innovation and ethics across international business communities.
UATP Interview in Air Transport News - 13 April 2015
UATP Interview in Air Transport News
Ralph Kaiser, President, CEO and Chairman of the Board, UATPATN: What was UATP’s volume in 2014?
RK: 2014 was a great year for UATP. Our charge volume exceeded USD 14 billion which was a new record; we also set a transaction record and continue with double-digit transaction growth for multiple years now. As you know, UATP lowers the cost of payment acceptance, typically 100 basis points less than other card brands and our stats are important because they equate to several hundred million dollars in savings within the industry. At a time when banks and GDS, like Amadeus and Travelport, are getting into payments in order to maximize their own revenue, UATP continues to find ways to lower the cost of acceptance.ATN: What direction do you see the industry going?
RK: I believe that the industry is going to make advancing technology a high priority. Business travelers want expect a better travel experience and have expressed a strong interest in utilizing their mobile technology. More than 81% of travelers carry a smartphone when traveling and most of them expect to be able to manage their travel with those devices. Companies are finally analyzing how differing technology can save time and money, and they will switch providers if they find something that better fits their needs, whether it’s an airline app or an expense management system.ATN: What makes UATP unique?
RK: UATP is a strong and secure closed-loop, global Network built solely to support the airline and broader travel industries. We have advanced our corporate charge card program to a complete end-to-end payment platform and information management suite. Our Network is also a robust payment gateway for airlines to accept the varying payments used across the globe, starting with PayPal in 2007 and both Alipay and Bitnet earlier this year. UATP will continue to enhance the Network to benefit further our airline Members.ATN: How does that contribute to overall growth?
RK: It contributes to growth because simply put, UATP evolves as the market changes.ATN: What’s new for the Network?
RK: Currently we are in the process of updating our information suites, DataStream and DataMine. We surveyed the airlines and corporate travelers that use the tools to find out what they wanted added to the product and are looking forward to rolling out the improved version later this year. We also just added SilverRail to the Network. This is important because it expands the rail segment of the Network across the globe. For the rest of the year, we plan to strategically grow our alternative forms of payment programs, with new players such as Alipay and Bitnet mentioned earlier, and support our current Issuers so that they can better develop their programs.
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Plastic fantastic: corporate cards - 15 March 2015
Plastic fantastic: corporate cards
Use of corporate cards continues to grow across Asia, with interest in strategic procurement augmenting demand for solutions for more frequent, lower-value payments. Here, we examine the latest developments in the corporate cards market and analyse where – and for whom – they work best.
Corporate cards were first introduced in the early 1990s as a means for organisations to manage employee purchases by pre-authorising them for specific vendors and/or product types, restricting purchases based on contract and transaction types, and giving companies the ability to set daily, weekly and monthly limits and controls. Perhaps most importantly for cost-conscious procurement departments, the corporate card solution offered substantially more control than corporate credit cards while lowering transaction costs. Surveys have suggested that transaction costs can be reduced by as much as 90% compared to traditional accounts payable processes.
While specific data on corporate card usage in Asia is not readily available, market participants claim that their use is growing, primarily as a way of interacting more efficiently with large quantities of low-spend suppliers for travel, entertainment, supplies and other miscellaneous, relatively small-ticket items. Government and other public entities are also using the cards as a means of managing expenses. Visa estimates the value of potential ‘cardable’ payments in the Asia Pacific region at $12 trillion, with China accounting for $7 trillion of that figure and India a further $1.1 trillion.
According to the company, in the near-term, mature markets such as Australia also represent a significant opportunity for growth, although it also acknowledges that moving payments to cards will require banks and card issuers to develop new, compelling propositions that lead to suppliers preferring card payments over other payment methods.
Since card providers have to comply with local regulations in each market, corporate card solutions vary from country to country – many countries do not permit cross-border issuance of cards, for instance. So which corporates are actually using cards today – and whereabouts in the Asia Pacific region?
Citi’s initial set of clients in every geography where it launched a business were subsidiaries of global companies headquartered in North America or EMEA, who were looking for cards that could be used by their growing workforce in Asia. However, as the market matured over the last decade, it has seen increased use of card solutions by local companies as well as growing interest from the public sector, explains Deven Somaya, Director, Regional Wholesale Cards Head Asia Pacific at Citi. “In terms of market maturity, Australia is probably the most developed market in the region and both federal and state governments are heavy users of corporate cards. Other mature markets are New Zealand, Singapore and Hong Kong.”
He refers to three key factors that encourage subsidiaries of multinational companies to use corporate cards, the first of which is having visibility into the programme in terms of measurement and control, enabling them to manage their costs and expenses more effectively.
Secondly, increased control of where the company’s money is spent. If someone is using petty cash to make payments, those payments can be made to anyone, whereas the card product digitises the transaction and this process enables systemic controls such as merchant blocks and transaction limits to be put in place. Post factor reporting provides a further layer of visibility and the control aspect of self-auditing.
Thirdly, because the transaction is digitised, it can be passed on by the bank to the client in an electronic format which feeds into various systems and saves a lot of manual entry of data, allowing expense management systems to capture data from the individual and enter an ERP system with additional pieces of information attached.
“Various research reports refer to the reduced costs of processing transactions made with corporate cards,” says Somaya, adding that multinational companies are increasingly globalising their functions, for example managing procurement globally rather than at regional or even national level. “We are seeing a growing number of shared service centres emerging across Asia which are taking a proactive role in managing indirect spend, whether that is on travel or procurement. Local companies are following suit – while the majority of their expenditure is obviously within the region, they are seeing benefits to using the shared services model.”
In the public sector, he describes a ‘bandwagon’ effect where administrations in South-East Asia are constantly looking at what their neighbours are doing in an attempt to adopt best practice. From a public sentiment perspective, providing increased transparency to the tax payer on how their money is spent is appealing to administrations that have made a commitment to reducing corruption.
According to Somaya, “clients are typically looking for a local solution in each market, but the ability to access consistent reporting and online tools and centralise data remains consistent across all the markets where we provide card services.”
When assessing markets with growth potential, Somaya mentions three countries in particular. “India has experienced considerable growth in corporate card usage, initially for travel but increasingly for procurement also. China is an untapped market in terms of the number of multinational and local companies who could potentially use corporate cards, while Indonesia is another country with a growing number of businesses and rapid economic expansion.”
Beyond those countries, there are areas where Citi is seeing a centralisation of specific industries – for instance, Thailand is a major hub for online travel agencies, which inevitably generates a considerable volume of card payments. “Companies across Asia are committed to improving the efficiency of their payment solutions and high volume; low value transactions are ideally suited to corporate cards,” Somaya concludes.
“In the past, travel management and procurement tended to be managed by different parts of the organisation, but we are seeing increasing consolidation of these functions internally. There is obvious value in using a single provider for all payment services in terms of being able to negotiate more favourable rates.”
A corporate perspective
The majority of AirPlus International’s clients are subsidiaries of multinational companies whose head offices are located in Europe or the US, although it is also targeting local customers, particularly in mainland China where it works with global Chinese brands. A number of public sector departments in mainland China also use its services. “In addition to Hong Kong and mainland China, our products are available in Malaysia, Thailand, Indonesia, Philippines, Korea, Japan, Australia, Singapore and India,” says Michiel Verhaagen, Executive Vice President Sales, AirPlus International. “The growth of economies across Asia Pacific means there is considerable scope for future growth in commercial card services,” he believes.
That said, he accepts that many local companies do not fully appreciate the benefits of a commercial cards programme yet. Nevertheless, he is confident that educational initiatives implemented by the various global travel associations is increasing awareness among businesses in the region. “These initiatives have helped to inform these businesses about the benefits of efficient payment and reconciliation process in business travel expenses management and the tools available, including commercial cards. Multinational companies tend to have expense management systems in place, but many local companies have yet to implement similar systems,” he says.
Who is using cards?
All kinds of companies sign up for corporate card programmes, from big business to small business and across a range of sectors including professional services, mining and resources and manufacturing – in fact, any company that wants to better understand and manage its expenses stands to benefit from having a corporate card programme. That is the view of Geoff Begg, Vice President, Global Corporate Card, American Express Japan and Asia Pacific, who says multinationals are looking for a card programme which enables them to manage expenses locally, regionally and globally.
“There is strong demand in all countries across the region, although India and China in particular are growing rapidly with the formation and growth of new companies. Some of the larger, more established countries are expanding from traditional travel and entertainment-type corporate cards to commercial cards,” notes Begg. He adds that corporate cards are used for all types of travel and entertainment spend from the traditional airline, hotel and restaurant expenses to general retail spend, utilities and even government and insurance spend.
“Companies across Asia are committed to improving the efficiency of their payment solutions and high volume; low value transactions are ideally suited to corporate cards.”
Deven Somaya, Director, Regional Wholesale Cards Head Asia Pacific, Citi
“Companies are moving away from per diem payments to employees to corporate cards for greater visibility and control. There is huge growth potential for corporate cards in Asia Pacific as the migration continues away from costly paper based invoicing to fast, efficient electronic payments on corporate cards.”
Asian companies with heads of finance or procurement who have worked in North America, Europe or Australia seek out corporate cards as they see them as a simple and proven way to improve bottom line results, says Marj Demmer, General Manager of Cards and Payments at ANZ. “Clients are looking for cards that can be used throughout the world with high rates of acceptance and low or no surcharges. International acceptance is important for business travel, but also when procuring from international suppliers. The more the card can be used, the bigger the working capital, visibility and efficiency gains for the client.”
While observing that demand in India is growing rapidly as companies seek greater oversight and control of business expenses, he also acknowledges that card acceptance rates hold back some mature markets such as Japan, where ‘cash is king’. “Leading corporate card providers work with travel management companies to bill travel bookings on ‘virtual cards’, providing enhanced data on staff travel (destinations, travel class, fare type). In mature markets, we are seeing more business-to-business payments shifting from cheque or bank transfers to card.”
In the more developed markets, Demmer expects to see a major shift towards more business-to-business and international payments being made by card. “Treasurers and CFOs will lead this push as they seek to improve the working capital position of their businesses and leverage strategic supplier relationships.”
Meanwhile, Ralph Kaiser, President and CEO UATP says that in China, large international corporations may have some corporate cards but the adoption rate is still low, although use of a corporate card for air travel is increasing. “There is limited usage in emerging markets (which for the purposes of this article include Vietnam, Malaysia, Philippines, Thailand and Indonesia). Corporations contract directly with the vendor for services, or in some instances deal solely with the treasury management centre which must carry the cash float,” says Kaiser.
Clients in developed markets such as Singapore and Hong Kong use international corporate cards that are widely accepted, while in the case of Japan or perhaps Korea, they may be using a domestic product that has limited usage overseas, he adds. “There is an upside in some markets, mainly China and India where domestic corporations are large and successful and are in need of a corporate card solution. In emerging markets, there might be some need but awareness is an issue. Furthermore, the undeveloped infrastructure and high risk of dealing in these markets makes it daunting for networks to issue corporate cards. It has been seen that rates would need to be set at high levels, making international corporate cards uncompetitive compared with direct invoicing or even local bank card solutions.”
According to Kaiser, in China and emerging markets, corporate cards are used almost exclusively with some component of travel. “Infrastructure limitations are part of the issue; the other is the demand to use it for procurement. However, we believe there is large growth potential for corporate cards in major markets like India and China in the short term. The opportunity for growth in emerging markets is also significant, albeit on more of a mid to long range outlook. Growth will be focused on the travel segment – it remains to be seen whether corporate cards can build a product for other segments in Asia, or if purchasing cards may become a factor in the future.”
A card for all sectors
Kees Kwakernaak, Head of Commercial Cards Asia Pacific, Bank of America Merrill Lynch describes commercial cards as a largely industry-agnostic business. “Simply put, the benefits of travel and entertainment and procurement cards are applicable to all our customers, across all industries. For a number of years we have seen the most robust demand from multinational clients but more recently, local corporates have shown a growing interest in adopting card based solutions. Whilst there are differences across the various markets, the requirement for efficiency, transparency and streamlined processes is universal, which should serve as a sustainable incubator for card adoption in the medium term.”
“The growth of economies across Asia Pacific means there is considerable scope for future growth in commercial card services.”
Michiel Verhaagen, Executive Vice President Sales, AirPlus International
Demand drivers are fairly consistent, as clients are unilaterally looking at streamlining their procure-to-pay processes to save on cost and to extend payment terms, he continues. “We see strong uptake in traditional travel and entertainment cards where employees are using their commercial cards to book travel, pay for taxis and general on-the-road expenses. Increasingly, we are also seeing a defined trend whereby clients are using cards in conjunction with central travel accounts. This product is an efficient way for clients to pay for their employees’ travel.”
The potential for ongoing growth in the Asian corporate card market is undeniable, according to Kwakernaak. “Banks in this space have seen a long period of double digit growth in commercial card spend in this region and in our view this will continue for many more years to come. The migration away from alternative payments options (including paper based payments) will continue.”
An obvious growth area for corporate cards is in their use as a payment mechanism for line-of-business or supply chain expenses. The 2014 First Data report ‘Digitalising B2B Payments to Streamline Supply Chains in Asia’ refers to increased use of commercial cards in Singapore for strategic procurement, with increased control and reporting options driving adoption. The firm is seeing increasing demand towards strategic procurement programmes for accounts payable automation and receivable financing for large distribution supply chains. The extent to which clients look for national or regional corporate cards rather than cards that can be used anywhere in the world depends on the business needs for which the programme is rolled out, explains Naveen Gupta, Regional Director Consumer & Commercial Payments, First Data Asia Pacific.
“International acceptance is important for business travel, but also when procuring from international suppliers. The more the card can be used, the bigger the working capital, visibility and efficiency gains for the client.”
Marj Demmer, General Manager of Cards and Payments, ANZ
“For employee travel and entertainment expenses, corporates expect the card could be used anywhere in the world but with suitable controls. However, for large procurement programmes or receivable financing, it is expected that usage of cards has a limited ecosystem to avoid unwanted fraud and keep costs below an acceptable threshold.”
He describes corporate cards as an excellent instrument for short-term financing and payment execution. “We expect demand in established markets such as Australia and New Zealand to continue to increase and we are also seeing increasing demand for corporate card solutions in emerging markets such as India and China. We project growth for these markets to reach up to 30-40% in the next 12 months.”
First Data also believes that the potential ability for commercial cards to transform business-to-business commercial transactions from manual, paper based transactions to more efficient automated processes is an opportunity to boost business productivity, reduce costs and strengthen commercial partnerships across Asia’s supply chain.
Despite all the advantages of automated electronic payments, too few companies are utilising digital payment solutions, Gupta concludes. “The reason for the slow uptake of electronic payments is difficult to pinpoint, although we believe that it is partly attributable to the perceived complexity of migrating so many supplier relationships from paper to electronic systems.” But as more and more leading corporate treasuries embrace corporate cards, hopefully the myths around the complexity of such programmes can be dispelled.
To view the original article, click here.
Pay As You Go - Business Travel Executive - 1 March 2015
Pay As You Go – Business Travel Executive
Mobile payment solutions have reached a tipping point, but the story deserves more than just a passing wave
BTE March 2015
With the much-hyped launch of Apple Pay late last year, mobile payments have continued to creep closer into the mainstream. According to a report from Business Insider Intelligence, payments made through Apple Pay accounted for between 0.1 and 1.6 percent of transactions at five top retailers in the month following the launch of the feature.
“Considering that the feature can only be used on the new iPhones we think that’s indicative of exceptional momentum,” the report reads.
Overall, the Business Insider research predicts that US mobile payment volume will grow at a five-year compound annual growth rate of 172 percent. Volume will rise to $818 billion by 2019, or just under 15 percent of total U.S. payment volume, the report predicts.
But while consumers may be more inclined to wave their phones in front of a point-of-sale terminal to buy a venti latte at Starbucks, it still remains to be seen whether mobile technology will be incorporated by-and-large into corporate card programs. Indeed, in much the same way that online booking revolutionized consumer travel but was not as easily integrated into business travel, so too do mobile payments still have some hurdles to clear before they become a standard part of corporate T&E programs. But the tide may slowly be turning.
According to Mary Miklethun, senior vice president of travel payment solutions at U.S. Bank, many of the bank’s corporate clients are beginning to ask about mobile payments, albeit as a supplement rather than a replacement for traditional corporate cards.
“They believe it will be more convenient for their employee card holders in certain circumstances; it seems likely that it could incrementally increase spend capture as well,” she says. “If you find yourself without your card but you do have your phone, you can still make a purchase. You are bound to capture more transactions that way. Can mobile payments ever completely replace commercial cards? Maybe, but we are a long way from that when you see all that has to happen first.”
Miklethun says one reason for the long horizon is the “many moving parts” associated with mobile payments, from merchant acceptance to accommodation of the different mobile devices people use, as well as sorting out which emerging players in the space will rise above others.
While issues such as these may slow adoption of mobile corporate payments, ultimately travel managers will realize that this payment method has advantages that can’t be replicated with a plastic corporate card, says Mario Zorn, director of virtual and mobile payment for Airplus.
“Better tracking of expenses and data visibility is just one example of the benefits it will bring,” he notes. “Others include more convenience and smarter purchasing choices for travelers, and better process efficiencies and program control for travel managers. Think of mobile payment as a credit card with a keyboard, screen and GPS attached and you start to get some idea of the potential. Here’s just one example: you’re in a Starbucks around the corner from your office and you go to pay for a coffee with your phone. However, company travel policy says you can’t claim for food and beverage bought within three miles of your workplace, so the phone blocks you from using your mobile corporate card.”
Zorn also believes that single-use virtual payment numbers, such as AirPlus’s A.I.D.A., are taking off fast – and virtual cards and mobile are perfect bedfellows. This is yet another reason mobile payments at the corporate level are poised to soon become more commonplace, he says.
Wendy Ward, VP marketing and communications for UATP, a global payment solution owned and operated by the world’s airlines, notes that the concept of virtual account numbers is one that is really gaining steam across the industry.
“UATP has historically been a virtual payments with the majority of our ‘cards’ being lodged,” she says. “This is how we started out in 1936. We are of course though, looking at the importance and demand on the corporate side for both types of payments; we want to make sure to provide our client base what they need and want to conduct business.“
UATP, in fact, recently announced a partnership with Bitnet, a Bitcoin payments processing platform, to allow UATP’s 260-plus airlines to accept Bitcoin payments, which further illustrates a continuing acceptance of innovative types of payments in the corporate world.
Waving Goodbye to Security?
As with any new technology, there are still security concerns around mobile payments in general. But some say these fears are overblown, and that perception is not reality when it comes to safeguarding the security of mobile payments.
“With the tokenization of the physical card account number into the mobile device and secure transmission of this information to the merchant, mobile payments based on the MasterCard platform will bring added security to the management of account details and transaction information,” says Richard Crum, senior vice president, T&E, Global Commercial Payments and Solutions, MasterCard.
Airplus’ Zorn agrees, noting that for payments made by waving a mobile device over a Near Field Communication reader, intercepting that NFC signal is exceptionally difficult.
“NFC-enabled payments can also be confirmed with a PIN number,” he adds. “And, we believe mobile payments will often be made with virtual card numbers, which are immune to fraud because they are used once only and can be controlled in many other ways. Finally, if there are any problems, travelers can act quicker. One call blocks all card numbers stored in their mobile wallet, and travelers’ ability to track spend on their phones means they can detect anything untoward much sooner.”
U.S. Bank’s Miklethun says mobile can be more secure because of tokenization, in which actual card data is never transmitted in the course of a mobile transaction. Instead, a unique single-use number is assigned, encrypted and used in place of the cardholder’s actual credit number. The merchant never gets the real credit card number, they get something that operates as a regular credit card number, but can’t be reused if it gets into the wrong hands, she notes.
Kevin Phalen, head of global card and comprehensive payables at Bank of America Merrill Lynch, adds that it will be imperative for corporations to make sure their overarching mobile policies provide the flexibility that’s required to support corporate mobile devices for payments and other mobile services.
In fact, many in the card industry say the benefits this new form of payments will bring to corporate travel far outweigh any possible security issues that may be raised. According to Phalen, mobile technology can greatly improve the efficiency of corporate travelers.
“Mobile devices are an increasingly important extension of how people do business every day, and a payments capability would be the next evolution” he adds. “However, a corporate mobile strategy should include much more than just a payments capability; it should also address data exchange, expense management and document management, such as receipts.”
Along those lines, MasterCard’s Crum believes that corporations will benefit from an increased ability to capture transaction data that can be used to streamline the expense claim process. “When more of the business travel spend is captured on card and this data is automatically fed into the travelers expense reporting solution, the time required to complete the claim process can be reduced significantly,” he adds.
Mobile technology will also allow an organization to capture more spend than before, according to Miklethun. “It may, for example, become easier to support people who wouldn’t normally be issued a card, such as consultants and job recruits, if you could save the expense of issuing a card by allowing that person to run charges on a mobile device.”
However, she cautions, “A lot would have to happen before that becomes commonplace. Hotels need to have equipment that can read information from a device, to name just one of many back office alignments that need to happen before mobile commercial payments begin happening on a large scale.”
Phelan does not believe the back office alignments needed to be made to accommodate mobile payments will pose a very significant problem, especially considering that “a corporate card is the ultimate payment method through the mobile device.”
While there may be some hiccups currently with back office compatibility, Miklethun expects this to be resolved in the near term as mobile payment methods become more commonplace among corporate travelers. “It’s happening faster on the retail side right now, but we believe the commercial side will catch up rapidly,” she says.
”Our expectation is that at least some of the technology around tokenization and mobile payments will become more available on commercial platforms within the next 12 months. It’s already starting to rev up. At the White House Cybersecurity Summit [held in February], for example, it was announced that Apple, Visa, MasterCard, Comerica Bank and U.S. Bank have committed to working together to make Apple Pay available for users of federal payment cards, including DirectExpress and GSA SmartPay cards. Expect this effort to pick up steam in the year ahead.”
In fact, Crum says MasterCard is actively working with partners and has built a digital enablement platform that card issuers and merchants can leverage to move towards mobile payments while continuing to enable card-based payments as they do today.
In terms of interoperability with travel and finance systems, there’s almost no difference from using a plastic card, Airplus’ Zorn believes. “The only point we would make is that you are only really going to reap the benefits of mobile payment if you operate an automated expense management system too,” he says. “Mobile fuses payment and expense together so closely that they become almost one and the same. That’s why travel managers will enjoy better visibility, control and efficiency in a way they can barely conceive today.”
Ultimately, Zorn says it is probably inevitable that mobile payments come to corporate travel in a widespread way, in large part thanks to the overwhelming influence of Apple. “There’s the Apple Pay factor,” he says. “To date, mobile payments have only partially taken hold in the consumer market, mainly because Apple wasn’t playing. Now that Apple has come to the table, it will push mobile payments along like never before, and once consumers are using the technology in their private lives they’ll want it in their business lives too.”
To view the original article, click here.
UATP Partnership with Bitnet News Articles - 19 February 2015
UATP Partnership with Bitnet News Articles
UATP has teamed up with Bitnet as a payment processing partner. This relationship will allow UATP to offer its Network of 260+ airlines the ability to accept bitcoin payments in a simplified manner.
Numerous news articles were produced regarding this partnership:
Pay to Play
From: Low Cost & Regional Airline Business; Volume 9, July 2014; Payments
New technologies for payments are gaining traction, with 83% of carriers regarding it as a major business priority, but there are still regional differences. Ian Putzger examines the available options.
Come July, there will be some perplexed tourists on London’s famous double-decker buses as they scramble to find alternatives to their useless British coinage. Effective from 6 July, cash fares will no longer be accepted on buses in the UK capital. According to Transport for London, the number of passengers using cash has dropped precipitously and, with projected savings of £130 million over nine years, it was decided to phase out this mode of payment. Instead, users will need either an Oyster card, pre-paid ticket or contactless payment card to travel on buses.
Alternative forms of payment (AFOPs) are on the rise. According to the latest Alternative Payments Report from payment and risk services provider WorldPay, AFOPs will account for over half of all transaction methods by 2017.
WorldPay’s latest Airline Report, which was released in March, also shows AFOPs gaining ground on traditional forms of payment in the air, although cards are still the most popular payment method. It predicts that the number of airlines offering onboard mobile payments will increase from 5 to 36% in the next two years, also noting that 18% of airlines plan to accept e- wallets onboard by 2016.
Ralph Kaiser, president and chief executive of Universal Air Travel Plan (UATP), the low-cost payment network owned by a number of airlines, notes that technological advances are enabling merchants to offer new AFOPs, giving them better reach and economics to target new customer bases.
UATP has been aggressively extending its own reach. It has established two issuers and universal acceptance by merchants in China and is now seeking to replicate this in India.
“Over the last few years we have signed a dozen or so new issuers and we are busy ramping up those programmes,” remarks Kaiser, adding that UATP’s AFOP processing programme has experienced exponential growth, “as has our prepaid/gift card programme”.
From an airline chief financial officer’s point of view, direct bank transfer is one of the best options among AFOPs. It is a much faster way of getting the money, without having to sit on inventory while a slower payment mechanism is coming through, remarks Michael Smith, executive chairman of the Airline and Travel Payments Summit and managing partner in Airline Information. In the Netherlands and Germany this avenue has been exceedingly popular, despite one serious drawback for the shopper: “There is no protection if the airline goes bust,” Smith points out.
There are more than 200 AFOPs on the scene today and among them is a fairly large number of e-wallets. Nevertheless, this category has not achieved the penetration rate that many observers had predicted. “With the exception perhaps of China, wallets have not captured the public imagination,” says Smith.
In North America PayPal stands head and shoulders above other wallets, or, for that matter, other AFOPs. Laurie Gablehouse, who looks after travel payment strategies at payment service provider GlobalCollect, notes that this market is still heavily geared to credit card use. “PayPal is the only real alternative. We are very limited in our options,” she says.
She recalls her previous work with Continental Airlines, which blazed a trail among US carriers implementing Western Union in anticipation of cash generation in some markets. The results were short of expectations. “It did make a difference in some markets, but not in North America,” she says.
Given the overall rise of AFOPs, advancing their payment technology is high on many airlines’ radar. WorldPay surveyed 68 carriers from around the globe and found that 83% of them viewed improvement and deployment of new payment technology as a major business priority. Nearly one-third (29%) are looking to set up sales via social media within 12 months, reflecting a shift in their perception from a marketing tool towards a sales channel. KLM announced in February that it would allow customers to send fare enquiries for their planned travel dates through social media, to which the airline would respond with a link sent in a private message on Facebook or Twitter; customers could then pick their method of payment and complete the transaction.
“Airlines were never set up to do direct sales. They were never set up to put an identifier on charge X and on charge Y,” reflects Smith.
The unbundling of services and the rise of ancillary revenues has added to this complexity, especially if parts of a transaction go awry. “Split payments and partial refunds are a little more difficult to manage,” remarks Gablehouse.
“Even on the credit card side ancillary revenues create a challenge,” she continues. “For example, you have to decide what appears on a statement. If a purchase consists of five individual elements, do you show one bulk amount or all individual items?”
Jim Davidson, president and chief executive of travel distribution technology provider Farelogix, points out that this complexity is on the rise, with airlines moving further beyond simply competing on schedule and price and towards custom-tailored retail, with an increasingly personalised level of service. To succeed, airlines must transform their technology shops into modernised retail environments. “This requires investment in technology for dynamic pricing, distribution and commerce,” he notes.
Adding further to this complexity is the rapid surge in the use of mobile devices to handle transactions. “Outside the first transaction, a lot of communication will be done on mobile devices, probably a tablet or a laptop,” Davidson says.
Payment solutions provider, Adyen, reports that globally the use of mobile devices for payments has reached at least 20%, a huge increase from four years ago when many merchants refused to entertain mobile transactions. It describes the travel sector as a segment of business with a disproportionately high share of transactions coming from smartphones and tablets.
WorldPay’s Airline Report shows that carrier management has got the message. Its survey found that 71% of carriers see the future of airline payments in the mobile segment and predicts that mobile acceptance on board will rise to 36% over the next two years. Half of the survey’s respondents view mobile payments as a way to keep up with competitors, while 45% are looking to them to boost their revenues.
WorldPay concludes that over the next two years, airlines will extend existing mobile services to offer ancillary purchases such as seat upgrades, booking management, onward travel and inflight purchases via mobile phones.
The promise comes with some potential hurdles. Mike Parkinson, WorldPay vice president Airlines, points to increased fraud risk, mobile platform diversity, and integration with current systems and processes as the biggest challenges associated with mobile payment.
“The main challenge with mobile is the failure of uniform mobile acceptance routines,” remarks Kaiser. He adds that UATP has issued some mobile apps and has been working with mobile-based AFPs, which should yield some results later this year.
Aligning mobile payment with AFOP mechanisms and the push towards personalised offerings calls for at least some tweaking of the existing IT infrastructure. Gablehouse notes that some mechanisms that require users to get redirected to a different website during the purchasing process are well integrated, but others are not.
“If you go for a mobile phone or a tablet, you do not want to give people four million ways to pay,” says Smith. Determining which payment options actually come up on users’ screens could be tailored to their individual payment histories, he adds.
The challenges around such issues are adding to the momentum for shifts in the provider landscape. Smith points to alignments like the partnership agreement between GlobalCollect and hybris software, an SAP firm and fast-growing commerce platform provider.
As the use of mobile devices to interact with airlines after the initial booking increases, there is decreasing scope for growth at airport check-in kiosks. The WorldPay Airline Report shows that 40% of the carriers surveyed expect self-service kiosks to be less important in the future.
On the other hand, Gablehouse suggests that kiosks have a lot of untapped potential that could add to airlines’ revenue streams. “I would like to see that open up more to local forms of payment,” she says. “Passengers could use the kiosk to purchase things they want on board, pre-fund a video or a meal. That is not an option now. Nobody is using their kiosk for these with alternative forms of payment.“ She adds that duty-free would be another possible channel to benefit from such an option.
Other than credit cards or cash, frequent flyer cards could offer yet another avenue for payments, both at the airport and during the flight, she continues. “You could put a chip on the card to pre-fund purchases on board.”
To view the article, click here.
2014 Business Travel Survey: Payment Firms Turn Page On Tame 2013
The corporate payment sector’s 2013 growth in the United States was lackluster, but issuers and card networks feel more optimistic about 2014. The Global Business Travel Association estimated total 2013 business travel activity grew 0.2 percent to 456 million person-trips compared with 2012, while spending grew 4.6 percent to $274 billion. Factors affecting business travel spending levels included a slow economic recovery and the U.S. federal government shutdown and austerity measures.
“If we look at the economies in North America, while they are recovering, it’s more slow and steady rather than something more dramatic as everyone was hoping for,” said BMO vice president of North American corporate card products, treasury and payment solutions Steve Pedersen.
[Please click here to view the digital edition of the 2014 Business Travel Survey, featuring all charted data, downloadable as a pdf.]
Banks, including BMO and Citibank, distinguished between public- and private-sector performance, with the public sector experiencing the worst of the effects as federal and some state governments continue to focus on cost containment and efficiency. The uncertainty of the U.S. federal government’s sequestration spending cuts in particular hindered consumer and corporate confidence and thereby business travel spend, payment officials said.
“We’re one of the largest providers [for the U.S. government’s payment program], and that portion of the book faced challenges,” said Citibank managing director and global head of commercial cards Manish Kohli. “But for the corporate portfolio—despite the weather—we did absolutely well.”
Kohli said he’s seen request-for-proposals activity during the past 12 months increase by “a factor of 100 percent” as companies look to transform and improve their existing travel programs. Compared with previous years, when some companies were consumed with other internal business priorities, firms now are taking the time to reexamine their programs and sometimes change legacy providers, Kohli explained.
“They’re showing a real keenness to improve, and not just as a pricing exercise,” Kohli added. “Companies are looking at card programs as avenues to drive more value in terms of process controls and centralization, [meaning] companies are now looking to run their card programs globally and with standard processes, rather than have them run country-by-country with different providers.”
UATP in 2014 is set to have its “best year ever,” according to vice president of marketing and communications Wendy Ward, and is on target to report more than $14 billion in charge volume this year, up from more than $13 billion in 2013. “People are coming out of their shells from the recession, and business travel is essential to maintaining client base and creating new [clients],” Ward said when asked to what UATP attributed the growth. “Events have also made a comeback and are probably fostering a good number of business travelers as well.”
Likewise, Bank of America Merrill Lynch’s charge volumes in 2013 were up “pretty significantly” due to new clients’ card-use mandates and some existing clients’ application of card products for “expanded uses,” including meetings, according to BoAML head of global card and comprehensive payables for global transaction services Kevin Phalen.
The bank is not a major player in the public sector. “Our business is probably less affected by some of those [sequestration issues] than other issuers, so I’d say our knockdown effect from that has been relatively low,” Phalen said. “Even though the weather presented intermittent issues, we’re seeing—in the travel space alone—probably 30 percent growth year over year.”
BoAML’s investment technology upgrades seems to be paying off, Phalen said, as some bank clients during the past 18 months opted to use T&E commercial, procurement and one-cards for higher-value payments. The card products provide “good data and reconciliation,” he added. “Because of the investments we made in technology, it gives [clients] better control and security, and as a result they’re willing to utilize cards for higher-value purchases.”
Data, Fraud And Security
Toward the end of 2013, a handful of high-profile data breaches—most prominently at U.S. retail giant Target—revealed vulnerabilities in the payment space. While the incidents primarily affected the consumer sector, several hotels were compromised, and hence T&E corporate cards likely were affected, industry experts in May told Business Travel News. The incidents raised questions around the security of the payment sector, including its methods for storing and protecting client data.
“The evolution of big data has meant that there’s a new potential repository of information for fraudsters to tap into,” said BMO’s Pedersen. “The Target incident taught us that we have to be even more diligent on how to protect information.”
While chip-and-PIN or EuroPay MasterCard Visa Technology (EMV) would not have protected cardholders from the online or “card-not-present” transactions featured in the recent incidents, issuers and networks said that after the breaches they’ve had more inquiries from clients about the embedded microchip authenticating solution, which is to become standard by October 2015. The fraud incidents also have encouraged banks to meet or advance their transition, as well as look for alternative fraud-prevention solutions for CNP transactions.
BoAML in April announced that all newly issued U.S. corporate T&E cards will have chip-and-PIN technology. BMO beginning in 2015 also will begin issuing chip-enabled corporate cards for renewed and replacement cards. Citibank already issues all new customers chip cards.
Card networks American Express, MasterCard and Visa in October joined forces to propose a global standard for online shopping meant to enhance security by using a digital “token,” instead of personal account information entered by users to process a transaction. The organizations are working with other industry bodies, including banking and payment associations, The Clearing House, the PCI Security Standards Council and EMVCo to further the initiative.
Another tool said to reduce fraud is a one-time-use virtual card. Travel managers can set virtual cards with exact charge amounts for particular vendors during a specified timeframe. Virtual cards can prove particularly useful for infrequent travelers—allowing firms to forego issuing a corporate card with hundreds of dollars in liability—and they also can make reconciliation easier, as all essential information, such as employee identification, vendor and spending amount, is transferred digitally.
While one-time use virtual cards have existed since 2006, companies around the world in recent years more widely have adopted them. BoAML provides the tool in 26 countries and has experienced “double-digit growth in North America and around the globe,” according to Phalen. As firms try to use card products in “non-conventional ways,” Citibank’s Kohli said in the past year he’s also noticed “more momentum” in the virtual cards and electronic payments space.
AirPlus, American Express, CSI and JPMorgan Chase also provide virtual card solutions. MasterCard has provided single-use account numbers through its inControl suite since its 2009 acquisition of Ireland-based payment company Orbiscom, and last October began piloting its own virtual card technology. Visa in October 2013 signed with Conferma to provide Visa’s European issuing banks the technology to dispense virtual card numbers. UATP can offer a single-use 16-digit virtual card through a partnership with eNett.
U.S. Bank provides virtual cards for lodging spend through a 2012 partnership with Conferma and Sabre, and soon will begin a project for air bookings, U.S. Bank Travel Payment Solutions vice president Mary Miklethun said. “The adoption [of virtual payment] in the market is indicative that [it is] growing and will continue to be an important trend both in terms of how corporate buyers manage their travel spend and also how different suppliers within the travel industry conduct payments between themselves,” she said.
Issuers and networks have continued to enhance or develop mobile and online platforms, as clients have showed more interest in the products. U.S. Bank in the past 12 months has focused on its mobile offering and plans to launch this year a mobile application for corporate card clients that will be similar to personal online banking, while maintaining “robust security” to protect client data, Miklethun said.
“[Corporate cardholders] will be able to manage their accounts the same way they manage personal accounts today, to see transaction history and sign up for alerts,” Miklethun explained. “We’ve built out a robust roadmap to go over and above to deliver receipt capture, expense caps and the like.”
MasterCard last year launched mobile wallet functionality called MasterPass, as well as a mobile application called Smart Data that allows Android, BlackBerry and iOS mobile device users to capture receipts by taking photos with their smartphones. The firm in February 2014 also acquired mobile wallet and on-device software and services provider C-SAM, which MasterCard group head of global T&E products and solutions Richard Crum said would help the payment network develop apps tailored for the T&E space.
Pedersen admitted BMO is “a little behind” the curve on the mobile front. However, the bank has developed a “major initiative” and is making “significant investments” to enhance its online and mobile presence, he said. “Our corporate payments capabilities on the mobile side will also be enhanced.”
In a surprise move, the European Union in March 2014 reversed a decision to include commercial cards from the European Union’s proposed cap on interchange fees. The proposal affects four-party systems, including MasterCard and Visa, in which payment involves banks as well as the merchant and customer. The cap would reduce to 0.3 percent from 1.5 percent the typical interchange fee on MasterCard and Visa commercial credit cards.
“We feel strongly that the regulation should not include commercial cards for a number of reasons, not the least of which is the corporate and supplier have negotiated prices and have chosen to transact with commercial cards because they see value in this payment form,” said Visa senior vice president of global commercial solutions Tad Fordyce.
In response, issuers and payment networks said they have been monitoring the situation and working to educate regulators on the value commercial cards bring to the sector in hopes of reversing the decision. They’ve also been preparing backup plans if the legislation goes forward as-is.
“There’s still a lot of uncertainty on whether that will remain on the books, and even if it does, it’s still another two to two-and-a-half years before it will be implemented,” said Miklethun. “If it does take affect, it will impact pricing strategies in that region.”
This report originally appeared in the May 26, 2014, edition of Business Travel News.
To view the full article on BTN, click here.
Asian Aviation Magazine - NDC angst
IATA has been trying to find common ground with travel industry stakeholders pretty much since the launch of its New Distribution Capability in 2012, and it’s still a work in progress if the recent UATP Airline Distribution conference in Singapore is anything to go by.
This was summed up when someone from the audience asked whether travel agencies should engage with IATA or the airlines on NDC. There was muffled laughter around the room, and a clear message from the panellists – go to the airlines direct. That said, progress has been made and the global distribution system (GDS) vendors are now generally giving qualified support.
NDC is based on a change in airline communications from EDIFACT to Extensible Markup Language (XML), designed to make it easier for airlines to communicate with travel agents and to offer elements such as dynamic packaging and merchandising. Big data would enable airlines to have a much better idea of who their passengers were, and what they might and might not be interested in buying.
The problem is that this involves fundamental changes in business relationships within the travel industry.
“There was some confusion when IATA first outlined its thinking, and certainly some industry commentators declared it to be a first step towards enabling airlines to deliver a richer, more customer centric product and fulfilment process which was previously available,” says Damian Hickey, vice president, global distribution sales & services, Asia-Pacific at Travelport. He points out that GDSs such as Travelport have in fact already offering the likes of dynamic packaging and merchandising for quite some time.
“With or without NDC, IT providers are already enhancing the merchandising capabilities that airlines are interested in,” notes Gianni Pisanello, director, airline distribution marketing, at Amadeus. He adds: “There has been a lot of hype around NOC.”
There were also privacy concerns •although one senior Asia-Pacific travel industry official said these were less of a concern in the region.
In January this year, a breakthrough of sorts was achieved with IATA and Open Allies for Airfare Transparency (a coalition of US travel trade organisations) filed a joint motion with the US Department of Transportation (DOT) concerning IATA’s Resolution 787 (which dealt with NDC.)
Open Allies agreed to withdraw its opposition to Resolution 787 subject to the implementation of certain conditions – namely IATA’s commitment to the core principles regarding anonymous shopping, compatibility of existing data standards with the NOC standard and the voluntary nature of the standard.
“It is proof that IATA has decided to listen to and take on board industry feedback; and address serious concerns that its original approach was anti-competitive, anti-consumer and did not enable transparency or comparison shopping,” says Hickey. “It is a positive step towards real progress on the next generation of travel distribution standards that reflect the needs of all stakeholders in the travel supply chain.”
However, the travel agent community is still to be convinced, and the message from the UATP event was that IATA needs to do more to engage this part of the travel industry. The general feeling was that the business model for NDC needs to be clarified and that travel agents need to incentives to engage with NDC.
IATA is certainly making efforts to get travel agents onboard. “IATA is working hard to engage and get buy-in from our travel agent partners including inviting them to join the Distribution Data Exchange Working Group (DDXWG) where the technical standards are being developed, as well as through the-Airline Agents Forum and the Passenger Distribution Group Advisory Forum,” notes Yanik Hoyles, Head, NDC Programme at IATA.
“Additionally, earlier this year, we created the Airline Distribution Stakeholder Forum with the purpose of driving a common industry perspective on key topics through the inclusion of airlines, agents and technology providers.”
Hoyles says, “The airline industry has entered a new era of varied service options designed to let travelers choose how they want to fly. Airlines are able to provide detailed information about products and purchase options on their own websites, and to recognize customer loyalty.”
He adds: “However, travel agents, with some exceptions, generally have access only to limited and commoditized airline product information. NOC is intended to close this gap and enable travel agents to have access to the entirety of the airline’s offering. As the benefits have become more visible, support for NDC has grown among all elements of the travel value chain.”
Pisanello warns that NDC “has to as to be extensively scalable and offer high performance. This will not be limited to providing a simple price but dynamically creating bundled personalised offers. These are not trivial things to consider for airline systems.”
Orient Aviation Magazine - A budding romance
Until recently, low-cost carriers (LCCs) would have been aghast at the very suggestion of paying commissions to global distribution systems (GDS) operators. Times have changed. LCCs and GDS are finding common, profitable ground.
When the Asia-Pacific’s largest LCC operator, the AirAsia Group, recently announced it had signed a deal that will sell all the carrier’s fares and ancillary services via the Travelport global distribution system (GDS, industry watchers agreed the decision was a groundbreaker in the GDS world.
Traditionally, LCCs don’t talk to GDS, let alone do business with them. LCCs preferred to market their fares via their own websites or call centres, cutting out the GDS middle man.
Not anymore. Not only is the LCC landscape changing, as it continues to record spectacular growth, but the GDS are re-inventing themselves, with upgraded systems and new products, which have attracted LCCs’ mercantile attention.
In recent years, the blinding growth of Asia-Pacific LCCs has brought its own revolution to the GDS industry. It has jolted them out of their complacency and forced them into encouraging LCCs to tap into every distribution channel available, not just their direct marketing channels, to fill the seats their fast expanding fleets are bringing to the market.
As Damian Hickey, vice president distribution, sales and service for Travelport, put it during the recent annual UATP Airline Distribution conference: “I can assure you that every significant low-cost carrier in this part of the world is in active dialogue with us. Previously, we would not have been in these conversations.
“LCCs are hitting a glass ceiling in terms of distribution. They are asking: ‘how can I distribute to travel agents in a more effective and efficient way?’”
What changed the game for AirAsia is Travelport’s Merchandising Platform, which was launched a year ago. It offers aggregated shopping, but also provides two other critical attributes: ancillary services and Travelport Rich Content and Branding.
The ancillary services component allows travel agents to sell pre-allocated seating, meals and bags, within their existing workflow rather than by booking on an airline website. Travelport Rich Content and Branding enables airlines to market and retail their products more effectively through customization of product display and content.
“The Travelport Merchandising Platform offers us the flexibility to connect to the GDS channel and to distribute our low fares to even more travelers as we expand our offering,” said AirAsia group chief executive, Tony Fernandes. The agreement means Travelport-connected agents worldwide will be able to search and book not only competitive fares, but popular ancillaries such as checked-in bags, advanced seat selection and in-flight meals offered by airlines in the AirAsia group. Travelers can compare and book AirAsia and AirAsia X flights alongside those
Although a leader in the Asia-Pacific in integrating GDS into its marketing, AirAsia is not the first budget operator to jump on the GDS bandwagon. Europe’s major LCCs, Easyjet and Ryanair, who have been throwing insults at GDS since they began flying, last year opted to use indirect distribution systems to build business. GDS offer easy-to-use, flexible products in the corporate travel market.
Ho Hoong Mau, division head of airline distribution at Asia-Pacific’s home-grown GDS, Abacus International, which is partly owned by Sabre, said its LCC business had grown dramatically in the last few years.
“We are getting a lot more flexible in the way we interact with our customers,” he told delegates at the UATP conference.
“We have seen LCC business growth of 80% to 100% year-on-year. It’s off a low base, but the booking numbers are in the multi-millions on Abacus systems. There are a lot of LCCs coming on board. Part of the reason is they are moving from a pure LCC model to a hybrid model.
“There’s a whole bunch of LCCs all over Asia, and from other regions coming into Asia, who are starting to need wider distribution. We are seeing a trend. Very clearly it is a great opportunity for us.
“As we interact with LCCs we realize their considerations are different. We need to remove some of the bells and whistles of traditional GDS content for them.”
Ho said because of the large number of aircraft orders by LCCs “they need to have multi-channel distribution to tap every single channel out there… that’s a key consideration”.
A recent Abacus survey of more than 50 LCCs revealed that more than 40% of their competitors were another LCC. “That wasn’t the case three years ago. With the levels of competition they are facing, especially in Southeast Asia, they need to maximize their revenue channels,” said the GDS.
Gianni Pisanello, director of airline distribution marketing at Amadeus, told the UATP conference the whole LCC situation has never been a technology issue. “What has changed is airlines are reaching a plateau. They are looking for high yield from the business traveler and also to reach new markets.
“They have fantastic targets in terms of growth and they need to tap into the travel agents community to tap that growth. So really it was when were the LCCs ready to participate,” he said.
It is a given that the days of a pure LCC are over. Budget airlines and groups of budget airlines are branching out, hybridizing and even entering the full-service sector. Indonesia’s Lion Air Group operates an LCC, has a premium carrier, Batik Air, and a joint venture regional airline, Malindo Air. Global leader, Singapore Airlines, which holds significant equity in LCC Tigerair, also owns a regional and long-haul LCC, Scoot. Scoot in turn has recently formed a regional LCC with Thailand’s Nok Air.
Analysts conclude the new partnerships between LCCs and GDS reflect the demand for multi-distribution channels to interconnect and sell various brands. Travelport’s Hickey said his company’s deal with AirAsia is regarded as an important shift in LCC business strategy by many in the industry.
“From a GDS perspective, it also indicates some significant changes within the GDS arena.
For many years, the GDS industry evolved purely because of the complications of distributing travel products.
“We put some very tight restrictions on the way you did business with the indirect channels. When airlines like Ryanair, AirAsia and others are re-entering the GDS arena, it is because the GDS are breaking down those restrictions and making it easier for airlines to do business with them.
“The GDS industry has been criticized, particularly by the LCCs, for being very expensive. It’s a fragile industry so costs are very important, but if there is one thing the LCCs detest more than cost its complexity. We certainly made it very complex for LCCs to distribute their products.
“Hopefully, it’s a sign that as an industry we are being more flexible. We have a long way to go, but it’s a first step.”
Hickey has a serious message for all airlines. “Ask not what your GDS can do for you but what you can do for your GDS,” he said. “At the end of the day we are a valuable channel. More than $57 billion in revenue goes through the GDS channel,” he said.
“My hope is that the airline community will engage with its GDS and work closely with them so you can achieve better value from your indirect channel,” he said.
“I hear from airlines: ‘I can’t sell my Skycouch on the GDS. Well, yes you can. Ask how you can get access to better yield. EasyJet have gone on public record with its accounts and said it has improved yields by 18% after going to the GDS.
“You have to sit down with your GDS and say: How can I do that, how can I get more value? The booking fee becomes less relevant if you are driving that sort of revenue improvement.”
To view the article, click here.
UATP Partnership Wins Award in Paybefore Awards Europe 2014
The airberlin Flight Voucher program, a creative three-way partnership between airberlin, UATP and Wirecard International, was named a winner in Paybefore Awards Europe 2014 in the Best Travel Companion category. The airberlin Flight Voucher program is a prepaid/stored value product offering, administered by Wirecard International and routed through airberlin’s UATP Network connections, creating a more efficient merchant acceptance process. The voucher program provides a secure alternative payment method for airberlin travelers, while creating an additional revenue stream for UATP and Wirecard.
TTG Asia - Work needed on airline ancillary distribution
Paige Lee Pei Qi, reporting from Airline Distribution 2014, Singapore, March 27, 2014
FULL-SERVICE airlines are flying in to capture a slice of the lucrative ancillary pie as it continues to grow, but kinks in how such products are distributed still need to be ironed out.
According to an analysis by IdeaWorksCompany and CarTrawler, global ancillary revenue is estimated at US$42.6 billion in 2013, up from US$36.1 billion in 2012 and almost double the US$22.6 billion collected in 2010.
Ancillaries will account for six per cent of total airline revenue in 2013, up from 5.4 per cent in 2012, they predicted.
John Chapman, chief commercial officer, Jet Asia Airways, said: “(Full-fledged carriers) have not been that great at offering ancillaries which is something that the LCCs have been doing very well but this has to be our goal if we want to increase our revenue.
“We cannot miss out on the opportunity for additional revenue, but at the same time we do not want to devalue the full product that we already offer. Some ancillary items that we are now looking to offer could be lounge passes, early boarding privileges and exit row seats,” he said.
Jay Sorensen, president, IdeaWorksCompany, said: “A la carte activities, such as those linked to fees charged for checked bags, on-board cafes and early boarding privileges, are a big part of the ancillary revenue story.”
Noting that Delta Air Lines’ “economy comfort seats” are its best-selling ancillary item, Chris Phillips, managing director – distribution strategy, said many travellers are willing to fork out more for extra legroom, a later boarding time and a chance to sit at the front of the plane.
The same analysis reported that slightly more than half of global ancillary revenue is sold to consumers via airline websites, onboard, and increasingly through travel consultants and OTAs.
Despite rising demand for ancillary items, Mario Kriebel, vice president commercial payment solutions, BCD Travel, pointed out that GDSs only offer certain ancillary products at present, resulting in travel consultants having to operate outside of the system.
He cited the example of airport limo pick-up not being available through the GDS. “We definitely need the ability to book these items now because travellers are expecting them already.”
Delta Air Lines’ Chapman said: “The challenge now is to help differentiate airlines’ products in a seamless manner to the travellers.”
To view the article, click here.
Alipay Brings Chinese Shoppers to U.S. Markets
In a study by Bain and Company China comprises of one of the fastest growing online markets.
On Nov. 19, 2013 Chinese e-payment company Alipay, International signed a partnership with Universal Air Travel Plan (UATP). Launched in 2004, Alipay is a subsidiary of the Alibaba group – which owns China’s largest B2B online marketplace Alibaba.com as well as other marketplaces including taobao.com and tmall.com. UATP is the airline owned payment network accepted by thousands of merchants for air, rail, hotel and travel agency payments.
The Alipay/UATP partnership will allow Chinese consumers to tap into the UATP airline/travel network using a payment method they are comfortable with and used to.
Alipay says that in 2012, it held over 700 million registered accounts in mainland China. Because of their partnership, Alipay Vice President and Chief Architect Jingming Li says that this is the beginning of an increasingly globalized online marketplace.
“Chinese shoppers trust Alipay,” Li said. “They are used to us.” Li said that because of the partnership, US businesses will have increasingly greater access to Chinese shoppers.
Li said that Alipay has partnered with other US companies before. iherb.com – a nutritional supplements company – recently partnered with Alipay and reported that iHerb’s sales on cn.iHerb.com increased 244.52%compared with the prior six-month period and 684.15% compared with the same period a year earlier.
Wendy Ward, the VP of marketing at UATP expressed excitement over the new partnership between UATP and Alipay: “The airlines, our main client-base, will benefit from this with increased traffic and purchases. It’s a win-win-win for UATP – Alipay – the US airlines,” Ward said.
Businesses interested in partnering with Alipay should contact: email@example.com
To view the full article, click here.
China’s PayPal extends its tentacles into US with big travel partnership
Chinese Internet companies are getting busy in the US.
While Tencent, Alibaba, and UC Web are making big-dollar investments in US startups, successful IPOs for travel portal Qunar and classifieds site 58.com have further improved the prospects for Chinese tech companies going public in the US.
Now, ecommerce giant Alibaba, which is itself expected to soon file to go public, is extending its payments platform, Alipay, in the US.
Today, Alipay, which is roughly equivalent to PayPal, announced a partnership with UATP, a payments service used by most of the world’s global airlines and accepted by thousands of merchants for air, rail, hotel, and travel agency payments.
The partnership opens up these travel businesses to the enormous and growing Chinese tourism market. Chinese consumers will be able to book and pay for their travel on international websites using their Alipay accounts. There are 800 million such accounts.
Chief architect of Alipay International Jingming Li says the company, which had noticed that a lot of its members shop directly from US and European websites, has been trying to figure out a way to help Chinese travelers have a smoother experience when going abroad. This deal now puts almost all of the world’s major airlines and hotels within Alipay’s reach.
The UATP deal comes soon after Alipay forged a similar partnership with American online retaileriHerb, which was announced in September. In an interview with Internet Retailer, iHerb marketing director John McCarthy said the deal had made China one of its top 10 markets.
Such partnerships could bring rich rewards to both Alipay and US ecommerce companies. While Alipay benefits from greater global reach, the American companies suddenly become more accessible to a large and upwardly mobile group of Chinese consumers. In 2012 alone, for instance, Chinese consumers made 83 billion trips out of the country. China is the world’s largest spender on tourism, topping $100 billion in travel spending last year, compared to the US and Germany, both of which topped out at around $80 billion. As China’s middle class grows, you can expect that travel spend figure to increase along with it.
As Alibaba nears its IPO, expected early next year, there are indications that it has high hopes for Alipay, which is China’s third biggest payment platform. Last week, the company announced that it will restructure Alipay’s parent company, Zhejiang Alibaba E-Commerce Co, as a new company in which 60 percent of its shares will be offered to new investors, Reuters reported.
It’s probably fair to say you’ll be hearing a lot more from Alibaba in the weeks leading up to its IPO. That’s understandable – there’s every chance it will be bigger, and more important, than Twitter’s.
To view the full article, click here.
Chinese e-commerce giant Alibaba restructures its payments arm
60% of Alipay will be offered to new investors, the rest held by employees.
Alibaba Group, the dominant e-commerce company in China, has restructured its Alipay payments arm, a unit that is taking steps to offer investment products and expand Alipay acceptance internationally.
As part of the restructuring, Alibaba will offer 60% of the shares in Alipay’s parent to strategic investors, with the remaining 40% to be owned by Alibaba employees. Alibaba founder and chairman Jack Ma will hold a stake of about 7% in the new entity, Alibaba says. The company being restructured is formally named Zhejiang Alibaba E-Commerce Co. Ltd., but Alibaba refers to it in public document as its Small and Micro Financial Services Group.
Alibaba, which operates the big Chinese online marketplaces Taobao and Tmall, is No. 1 in the Internet Retailer 2013 Asia 500.
Alipay, an online payment service akin to eBay Inc.’s PayPal, is widely used to make purchases in China, principally for making online purchases but also for paying bills and conducting other offline transactions. 800 million Chinese consumers have Alipay accounts, Alibaba says.
Alipay has recently signed up some U.S. e-retailers to accept the Chinese payment system. For example, iHerb Inc., No. 204 in the Internet Retailer Top 500, began accepting Alipay this year, leading to a significant increase insales to China, the e-retailer says.
In another move to expand acceptance, Alipay announced today a deal to make it easier for global airlines, hotels and other travel companies to accept Alipay. The Chinese company has formed an alliance with UATP, a payment network owned by airlines around the world that connects to many travel companies, to enable hotels, railroads, travel agencies to accept Alipay through the UATP Network.
“Alipay is dedicated to meeting the needs of China’s vast and growing pool of keen overseas travelers by making it easier for them to pay for air tickets, book hotels, rent cars and make other travel-related purchases online from the world’s leading airlines and accredited travel agencies,” says Jingming Li, vice president and chief architect of Alipay International.
To view the full article, click here.
Alipay deal could open door to more Chinese visitors to Bay Area
China’s leading online payment system Alipay announced a partnership Tuesday with airlines and travel agencies that will allow more Chinese travelers to buy plane tickets online without a credit or debit card, potentially setting up the Bay Area for an influx of visitors.
Alipay is the online payment affiliate of China’s colossus e-commerce company Alibaba Group, which has offices in Santa Clara. It has joined with UATP, the payments system used by almost every major airline in the world, as well as tens of thousands of hotels, travel agencies and rail systems. The new partnership will allow China’s 800 million Alipay account holders to book tickets from airlines such as American Airlines and United Airlines using their Alipay accounts.
The deal removes roadblocks for many Chinese, particularly middle-class and young citizens, trying to fly internationally, and could be a boon for the U.S. tourism industry and the Bay Area, a top destination for Chinese business leaders and entrepreneurs.
China is second only to Japan in the number of trans-Pacific travelers to the U.S. By 2017, China and the U.S. will exchange 5.2 million passengers annually, which represents 6.7 percent year-over-year growth, according to the International Air Transport Association.
San Francisco International Airport receives 73 flights each week from China. That number will jump in June when United begins adding nonstop flights between Chengdu, China’s fourth-largest city, and SFO. With the Alipay option, industry experts expect demand for flights to the Bay Area will accelerate.
“The Bay Area is one of the biggest destinations for the Chinese traveler,” said Jingming Li, who heads Alipay’s international operations from the Santa Clara office.
Until the partnership with UATP, Chinese consumers could not buy directly from a U.S. airline with Alipay. But in China, many consumers can only make online purchases with Alipay — out of a population of 1.4 billion, there are about 318 million credit cards in the country, according to research from Hudson Crossing. The U.S. has about four times that much plastic.
“It’s a heavily walled garden when it comes to credit cards,” said Henry Harteveldt, travel industry analyst with Hudson Crossing.
PayPal, its U.S. equivalent, is slightly more than one-sixth the size, with about 137 million account holders.
UATP serves about 250 airlines, and each airline will decide whether they want to add Alipay to its website, said spokeswoman Wendy Ward. Li said Alipay could “be up and running” on airline websites in a few months.
China spends more money on tourism abroad than any other country — $102 billion in 2012 — and Chinese travelers account for nearly one out of four new passengers expected to join the growing international travel market by 2016, according to the World Tourism Market and the International Air Transport Association.
The Bay Area has benefitted from much of that travel money. Chinese investors have invested in startups and tech companies, and backed infrastructure such as Hanhai Z-Park in San Jose and a $1.5 billion development near Oakland’s Jack London Square.
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UATP Exploring Ways To Expand Reach
In an effort to further broaden its reach into non-airline travel categories, payment supplier Universal Air Travel Plan is exploring “multiple solutions to maximize” its network, UATP officials this month told BTN. Possible avenues include partnerships with credit card networks or other suppliers, as well as the continued development of virtual cards.
“We’re not currently accepted from a pure UATP network perspective for anything in a broad case as far as hotel and car rentals,” said UATP vice president of global sales K. David Holmes. “So we have a challenge there.”
One concept, according to Holmes, is partnering with a credit card network provider —MasterCard ,for example—to generate one-time-use card numbers, which would be associated with a particular air transaction to “power a transaction that wouldn’t necessarily or traditionally flow over the UATP network,” like a hotel booking or rental car reservation.
“We are touring some options to deliver some of these solutions to market,” Holmes said. “That would allow us to expand more of the travel experience in that [clients] can bill things centrally, like hotels and car rental, as part of the air travel package which we do initially.”
While the company is exploring new connections, it already has partnerships with payment solution eNett International and the La Quinta Inn & Suites hotel chain. Through eNett’s Virtual Account Number solution (formerly vNett), UATP can issue single-use, 16-digit virtual cards for clients. Although the partnership has been in place since 2009, UATP has yet to launch a customer for the capability, but still hopes to “bring people onto that platform,” said UATP vice president of marketing and communications Wendy Ward.
“We’re talking to carriers and corporate subscribers about enabling UATP broader usage over the eNett solution,” Holmes said. “Some discussions are ongoing, but we expect to have some of those announcements within 2014.”
UATP’s partnership with La Quinta allows organizations to centrally bill payments to La Quinta. Walmart in 2010 became the first client to utilize the solution.
UATP is exploring similar relationships with other suppliers. “The last option is looking at those partnerships, whether that’s via the eNett platform for the T&E card, or what other partnership opportunities are out there for us to expand the utility of the UATP network from the T&E perspective,” Holmes said.
Meanwhile UATP this summer added Chinese “passenger name decoding” to its DataStream and DataMine reporting systems, so users can search for tickets by entering a passenger’s name in Chinese. “This is great because we have Shandong and China Eastern [airlines] within China that are issuers, and we have Air China as a marketing partner,” Ward said.
Additionally, UATP in August began providing online DataMine help screen shots in Portuguese and Spanish.
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By JoAnn DeLuna
Latin American Carriers Growing Despite Constraints
Miami – Like carriers in other parts of the world, Latin America’s airlines are beset by a bevy of challenges ranging from high fuel costs and taxation to distribution dilemmas and infrastructure that can’t keep pace with their growth. Those challenges, however, coincide with the region’s booming economic growth, its tremendous influx in foreign investment, its brisk growth in GDP and the number of people in the region living above the poverty line, noted Alex de Gunten, executive director of the Latin American and Caribbean Air Transport Association (ALTA) during a presentation here last month at a UATP conference.
But de Gunten also noted that “one out of three flights in the region operates into or out of a congested or overcongested airport. Yes, we are forecasted to grow a lot, but we better do a better job in terms of planning our infrastructure.” Referencing airport infrastructure rankings published by the World Economic Forum, he said, “We seem to be going in the wrong direction and this a major concern.”
De Gunten also bemoaned fuel costs incurred by the region’s airlines. “You would think it would be reasonable given fuel production [around the region],” he said, “but it’s not the case.”
Segueing into the conference’s primary focus, de Gunten added that “there are not many areas where airlines have a little control, or can reduce costs. Distribution is one of them.”
But, according to ALTA industry affairs manager Hernan Sznycer, the region’s airlines face online and offline distribution challenges. The latter includes high global distribution system costs, travel agency commissions that are “regulated in certain markets” and deficiencies in distributing ancillary services.
Online distribution, meanwhile, presents both obstacles and a huge opportunity. According to Sznycer’s presentation, the challenges include a “multiplicity of legislations and regulations,” inefficient infrastructure, fraud and relatively low credit card adoption.
Another fact is the relatively low rate of Internet penetration in parts of the region, which means carriers must continue to sell the bulk of their tickets through more expensive offline channels. But the opportunity is in the growth trend. According to PhoCusWright data presented at the conference, the compound annual growth rate for online travel during the past five years was 31 percent, versus 1 percent for offline. “This is a trend that we think will continue,” Sznycer said.
Aeromexico senior vice president of revenue management and distribution Ruben Martinez suggested direct connections “could be a solution” and said the airline is “trying to develop solutions for the mobile web.” But he added that the region’s “legacy carriers” are facing “some delays in IT development.”
At another Mexican carrier, Aeromar, chief planning and commercial officer Fabricio Cojuc Wolfowitz explained how, after interline relationships with Aeromexico and Mexicana ended, “the most important thing we did was to rethink the business model in terms of distribution.”
Aeromar, he said, is a regional airline that operates 18 50-seat aircraft and primarily serves business travelers. Five years ago it sold 5 percent of its tickets online; today that figure is close to 30 percent. “In spite of restrictions we face with our legacy distribution platform, we believe that could grow rapidly to 50 percent,” he said. “So we are putting a lot of focus on finding alternative means of distribution, and we believe we are in a good position to grow revenue and passengers even more.”
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By David Jonas
Latin America's New Kid On The Block Won't Get Fooled Again
The Beat — a travel business newsletter
Insel Air probably isn’t that well-known outside its rather small network in the Caribbean and South America, but the distribution dilemma it faces as it continues to grow is quite familiar. The Curacao-based carrier learned the hard way about what its chief commercial officer described as the double-edged sword of global distribution systems.
Within a year of starting flights in 2006, Insel Air was ready to grow its operation beyond its one 15-seat airplane. “Until that time, the distribution channels that we had were very simple,” said Jurgen Lippinkhof, speaking here during a UATP conference. “We had a website and a reservations system which was web-based. That sufficed.” But in the context of expansion plans, it became “a different ballgame.”
So the startup decided to “invest heavily in distribution systems,” including participating in all the major GDSs and developing a Sita-based reservations system. It joined ARC and other Bank Settlement Plans, became a member of the International Air Transport Association and the Latin American and Caribbean Air Transport Association, and implemented various codeshare and other interline agreements. It now operates to 16 destinations in 11 countries, including Charlotte and Miami.
“It’s easy to sign a contract with GDSs,” Lippinkhof said, “but once everything is in place and you are good to go, you find out about all the costs related. I was kind of surprised to be announced [at the conference] as an expert on distribution systems because we are the new kids on the block and we are just finding out what it actually means to be a part of all those things.
“Being part of GDSs and trying to get your product out to passengers is an expensive hobby,” he continued. “Right now, it’s about 13 percent of all our costs. That’s more than we pay to our employees.” (That 13 percent, he said, includes GDS fees, costs related to its own res system, agency commissions and credit card fees.)
And GDS participation isn’t just costly for Insel Air. It’s also restrictive. “We’ve also developed our own direct-sell tool that we are trying to promote,” Lippinkhof explained. “We find out that the GDSs all want full content. I don’t have problems with giving full content. But when I tried to push my own direct-sell tool, I found out that most GDSs do have a clause in their contracts which prevents me from doing that in a successful way and I cannot discriminate among different GDSs. That is basically my main problem with the distribution systems: I cannot give an incentive to our buyers, be they travel agencies, wholesalers or whoever. If I give them an incentive to sell through our own system, most GDSs tell me that I am discriminating against them. When they distribute our product, they are paying fees to the travel agent to use their GDS, and that is an incentive they are paying to their clients to promote their GDS, whereas if I tried to do the same thing, I cannot do it. I think that is an unlevel playing field.”
If GDS contracts come with unpalatable terms and conditions, why sign them? “That’s why I was surprised to be termed as an expert,” Lippinkhof quipped.
But he added that as Insel Air rapidly grew, it needed to broaden its distribution, and GDSs seemed the best way to do it. As such, he said the airline is “very dependent on those GDSs. As a matter of fact, I am very happy with it because we have a very scattered market. In some of our destinations the Internet penetration is 5 percent. Look at Haiti. They are very dependent on the traditional sales channels. They like face-to-face contact. They go through travel agencies. I don’t mind paying a fee or commission for that.
“Of course we have legal people looking at the contracts, but we were not fully aware of all the consequences involved,” he continued. “We found out and it won’t happen again.”
With those lessons still fresh, Insel Air currently is attempting renegotiate its GDS contracts “to see if we can come down on the prices that they charge us,” Lippinkhof said. “Some GDSs are more willing than the others.”
David Jonas with reporting by Jay Campbell
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SafetyPay Speaks on Role of Payments at UATP Airline Distribution Conference
Company Vice President Participates in Panel that Addresses the Importance of Payment Strategy to Distribution Success
SafetyPay™, the real time online-banking payment solution that enables consumers to shop from merchants worldwide and pay directly from their bank account in their local currency, was honored to send Vice President of Sales, Sandra Feinberg, to participate as a panel speaker at the 2013 UATP Airline Distribution Conference in Miami, FL recently on April 18th.
Feinberg spoke with six other presenters on how payment strategy can help increase the likelihood of distribution success. Also participating were representatives from Lufthansa AirPlus, Telchar B.V. Payment Fraud Consultancy, WorldPay, GlobalCollect, Southwest Airlines and Delta Air Lines.
The panel’s discussion lasted about 45 minutes, and was moderated by K. David Holmes, VP Global Sales for UATP. The speakers presented, discussed and responded to audience questions regarding payments, the largest distribution cost for airlines. They provided information and observations regarding the roles that fraud, credit cards, alternative payments and more play in payment strategies and successful distribution plans.
The panel emphasized the need for a wide-ranging payment strategy that balances customer preference with airline financial requirements. “In many developed and developing markets around the world, the costs and limits of using credit cards are costing airlines high fees and lost business opportunities,” said Feinberg. “Airlines need to enable customers to purchase online using real-time bank transfers and even cash to reach a broader market and protect themselves from fees and fraud.”
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As Distribution Evolves, Agents Will Remain Key, Speakers Say
Despite direct sales, the rise of ancillary products, and the perceived threat of the New Distribution Capability, travel agents will continue to play a key role in airline distribution for the foreseeable future.
That was the consensus of executives who spoke at the UATP Airline Distribution Conference in Miami last week.
Should be rewarded
An Air Canada executive who was instrumental in developing the carrier’s merchandising strategy said that “of course” travel agents have a role to play in the sale of airlines’ ancillary products.
Moreover, agents “should be rewarded for increasing sales and revenue for the airline” – whether for sales of ancillary products or airline tickets, said Graham Wareham, senior director of distribution and consumer direct, adding: “There’s no difference.”
Gianni Cataldo, a senior executive at a technology company that builds merchandising platforms for airlines, said, “We sit down with airlines and look at merchandising on a channel by channel basis.” But the agency channel is often neglected, said Cataldo, vice president and general manager for the Americas at Datalex.
“Ironically, the agency is the best opportunity for an upsell” for the airline, he said. “There is definitely a role for the agency to be involved in this mix. Something that can be done easily by the agency might be a challenge for technology.”
Impact of NDC on agents
Norm Rose, president of Travel Tech Consulting, noted that some travel management companies are concerned that they will lose revenue if IATA’s NDC takes hold.
“We see some ridiculous things in the press about NDC,” he said. “All it is, is a standard.”
But for decades, the goal of TMCs has been to maintain GDS productivity, he said, “and the person with the best GDS skills was usually the best agent.”
That will change, he said.
“We’re going to see Nordstrom agents,” Rose said, referring to the department store that is famed for personalized service. “What’s more personalized than offering ancillary services that meet my needs?”
The light at the end of the tunnel, Rose said, is American’s new agreement with Travelport by which the companies will connect via their APIs.
“This is a watershed event, the biggest news in travel distribution,” he said. “I’m hopeful this means everyone will participate in this new world.”
To the airline audience, he added, “you can’t do this without some involvement with the [agency/GDS] channel. It’s going to be a multichannel world for some time.”
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AA Exec Seeks To Shed Light on Direct Connect, NDC
An American Airlines executive sought to clarify the issues of his carrier’s direct-connect strategy and to IATA’s New Distribution Capability.
At UATP’s annual Airline Distribution Conference in Miami, Cory Garner, managing director of sales operations and distribution for American, compared the direct-connect strategy to the introduction of high-definition television a few years ago.
How it works
“If you use Verizon or AT&T U-verse, you may remember seeing rolls of multicolored fiber optic cable in your neighborhood,” he said. “That’s the pipe. You also have to have a box in your house.
“In the airline distribution analogy, Farelogix is the pipe,” he said. Farelogix is the developer of application programming interfaces (APIs) for several airlines, including American, Air Canada, Delta and US Airways.
The new pipe offers the ability to be more granular and nimble, Garner said.
Now that American has reached an agreement to link its API with Travelport’s in order to distribute richer content to travel agencies, Travelport’s subscribers become a “neighborhood” where the airline version of high-def TV is available.
Travelport provides the “box” to agencies in its neighborhood to allow them to display “high-def” content.
Will agents like it?
Garner believes agents will like what they see, given his own excitement the first time he saw what the new connection will enable – fresh content, with real-time pricing.
He said Travelport deserves credit for its forward thinking in this area.
“They’ve been building around the G2 Switchworks technology [purchased by Travelport in 2008]. Their Universal API is the box. They’ve been architecting their business for this for a long time.”
Garner said he hopes to do more deals like the Travelport arrangement.
Now, about NDC . . .
As for IATA’s New Distribution Capability, Garner described it as “nothing more than a language to allow two computers to speak to each other and have an interchange of data.”
It’s a matter of efficiency, he said. “Many airlines are using the same language. It’s not better when you have to learn 12 languages of the world in order to travel.”
NDC will permit the display of broader content that can be tailored to customer’s needs, Garner said.
“I don’t think NDC changes the competitive dynamic,” he said. “The lowest fare is always available if you want to be successful. You need the back of the plane filled too.”
In response to arguments that NDC will allow airlines to charge higher prices, Garner said, “I don’t know of any airline that thinks this is a free pass to charge higher fares.”
Customers can provide their personal details or not, he said, but the notion that airlines will use those details against their customers is “utter nonsense.”
“People aren’t stupid. The first airline that does that will be the last to get anyone’s personal details.”
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Fear of unknown grows rampant as IATA pushes its NDC initiative
IATA describes NDC simply as a “collaborative industry initiative to define a messaging standard that will enable retailing opportunities through the indirect (GDS/travel agent) channel.”But opponents smell an airline plot to rid the industry of GDSs and accumulate data on passengers as a means of setting fares and seat availability at the individual level.ASTA simply sees reason for caution.“It is a reinvention of the travel agency distribution system,” said John Pittman, ASTA’s vice president of industry affairs. He called the Society’s position on NDC “neutral but not passive.”ASTA, he said, continues to ask “probing” questions to determine what NDC could mean for the agency distribution system.On the plus side, he said, NDC could mean an end to the dreaded debit memo. But he also said that IATA’s attempt to standardize the language used for direct connections already being built between airlines and distributors such as GDSs, agencies and travel management companies, could complicate interline agreements.And there are other fears.One is that NDC will upend the current economic model under which airlines pay segment fees to GDSs, which in turn pay travel agencies and travel management companies (TMC). Those fees can mean the difference between turning a profit or losing money for TMCs.A second concern is that NDC’s authenticating capabilities — revealing to the airline exactly who the traveler is — will mean that carriers will offer passengers fares derived from their past purchasing behavior or from other demographic information rather than offering a full range of fares.Some consumer advocates and travel managers fear that this could mean airlines will not offer any fare on a high-yield flight to a budget passenger, or will offer higher-priced tickets to a passenger living in a ZIP code with a high proportion of passengers who fly business class.NDC’s defenders argue that market forces created the current airline distribution model, and those same forces will create the next model.But however the model changes, speakers and delegates attending last week’s UATP Airline Distribution Conference in Miami seemed to agree on two points: First, the changes will not take place overnight; and second, they will not be predictable.Moreover, NDC supporters say, some concerns being voiced by opponents exist already and are not unique to NDC or even caused by it.One thing appeared clear at the conference: Despite constant griping by airlines about GDSs, no one believes they will be going away in the foreseeable future for a simple reason: GDSs deliver the airlines’ highest-yield passengers, without whom the carriers can’t survive.Even American Airlines, which has led the drive for direct connect, an effort seen by many as a way to bypass GDSs, whose fees airlines consider so onerous, is willing to pay the GDSs for those passengers, especially when they are business travelers.Cory Garner, managing director of sales and distribution for American, said TMCs consistently book the airlines’ highest-yield passengers, “so it’s worthwhile to pay more for TMC volume than for the typical leisure channel selling the lowest fare.”Airlines still pay agencies for their sales, though exclusively on a performance basis.Another argument offered by NDC supporters is that the technology will enable agents to sell the airlines’ ancillary products and services.Graham Wareham, senior director of distribution and consumer direct sales for Air Canada, said airlines want to display their products on as broad a shelf as possible, and that not only means selling through travel agencies but also making sure agencies have all the information they need about ancillary products.“Of course travel agencies have a role in the current environment,” Wareham said. “Their relationship with an airline should involve compensation.”GDSs have what Jean Charles Odele Gruau, regional director of the Americas for IATA, described as a “privileged position with airlines and travel agencies.” He said he sees GDSs as continuing to play a “key role” in the evolution of distribution.
To support that assertion, he cited Travelport’s recent announcement of a new merchandising platform that enables comparison shopping for ancillaries and fares.
That kind of platform enables airlines to display what they have to offer in the most effective way, he said.
Garner compared NDC to the rollout of high-definition TV, and he compared Farelogix, which is building the pipe connecting American with Travelport, to the trucks that rolled out huge spools of multicolored cable when HDTV first arrived in a neighborhood.
Garner compared the dramatic improvement of HDTV to the enriched content that travel agencies will see with the implementation of NDC.
Though optional, NDC is an initiative to standardize the XML language that airlines use to connect with indirect channels and enable them to display in the GDSs such ancillary services as WiFi and extra-legroom seats far more effectively than they can today.
Addressing fears that a new XML standard is an effort to do an end-run around GDSs, Garner pointed to American’s agreement with Travelport. XML is simply about the pipe that delivers information about all the services an airline is selling, he said. The resulting direct connection can be made to a GDS or to a travel agency, Garner said.
Delta Air Lines, which began selling its Economy Comfort seats on Travelport last week, is also using a direct-connect pipe to Travelport. But its pipe is not XML-compatible. Chris Phillips, managing director of distribution strategy for Delta, said that’s because XML is still an evolving standard, whereas currently “APIs are easy.”
APIs are openings in software code that enable developers to insert their own instructions — in this case, communications links between an airline and a third party.
Delta is also building direct connections to travel retailers, including leisure agencies, Phillips said, adding, “We think agents will be better informed and provide more value to the customer” with direct connections.
IATA representatives also denied that NDC would hinder comparison shopping, one of a number of concerns about NDC raised by opponents, particularly by Business Travel Coalition Chairman Kevin Mitchell.
Addressing that concern, Odele Gruau said that under the NDC proposal, airlines would only authenticate travelers who opt to be identified.
“Authentication is optional,” he said, comparing it to offers consumers see from Amazon when they allow cookies on their computers.
Odele Gruau said that right now, travelers can be “trapped” on airline websites, entering their frequent flyer numbers and seeing only what that airline has to offer, while NDC means consumers “will receive different airline offers.”
Flint said that today, many consumers will first check fares on a site like Kayak and then jump to the airline site to make sure that carrier isn’t offering a lower fare there.
“If you’re in indirect distribution, this should drive you nuts,” Flint said. “The idea of NDC is to close that gap with the indirect channel so you’re not necessarily jumping over to the airline site.”
Addressing privacy concerns, Flint said that NDC would have no impact on any privacy rules and regulations that already apply to airlines, GDSs and agencies, nor would it require agents to share their customers’ information.
Flint said commercial aviation is a hotly competitive industry, and any airline that does not present a full range of fares to its customers will lose market share.
Perry added,“The marketplace enforces discipline.”
At least one travel agency is clearly supporting NDC.
“I want to be able to do exactly what the airlines do on their websites,” said David LeCompte, president and CEO of Short’s Travel, a TMC that also arranges travel for sports teams.
“To have airlines each do their own thing would be chaotic,” he said. “To have standards makes total sense. … If I can offer additional services that the consumer or the corporate traveler wants to purchase at the time of sale, it’s a win-win-win.”
For that reason, he said he was “perplexed” by the widespread opposition to NDC as laid out in Resolution 787, which IATA has filed with the Department of Transportation.
LeCompte acknowledged that selling ancillaries does add steps to the sales process, which some agencies have seen as creating more work. But he said he sees ways to use technology to sell ancillaries efficiently and cost-effectively.
Follow Kate Rice on Twitter @krtravelweekly.
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