The dominance of traditional card payments in the travel industry is being challenged.
Alternative forms of payment (AFPs) are no longer novelties utilized by a few early adopters — these methods are reshaping how customers pay for travel. As the industry approaches a critical tipping point, airlines and travel merchants need payment infrastructure to handle multiple kinds of payment — or risk becoming obsolete.
Card payment processing has been historically limited by batch processing, which is slow by design, increases merchants’ risk for fraud and declined or rejected transactions, and elongates the period between the transaction and settlement. Many AFPs address these shortcomings, but building support for these methods can be cost- and time-consuming.
Two technologies exist to solve these challenges — a parsing engine that addresses the deficiencies of batch processing and an AFP platform that makes onboarding new payment methods simple and quick — and can be accessed through a single payment provider.
The Rise of AFPs in Travel
All industries have seen a significant proliferation of AFPs in recent years. These payment methods — which include digital wallets, buy now, pay later (BNPL) options, and local payment solutions — have become increasingly important for merchants seeking to meet evolving customer preferences.
According to PayPal, digital wallets alone accounted for 49% of global e-commerce transaction value in 2022 and are predicted to reach 54% next year. When combined with other AFPs such as account-to-account payments and BNPL options, alternative payment methods will represent the lion’s share of e-commerce transactions.
In the travel sector specifically, the adoption of AFPs has grown by approximately 40% since 2019. This shift reflects changing consumer behaviors and expectations, especially as travel demand continues to surge. For example, according to PYMNTS, 74% of travelers (led by affluent and millennial travelers) said they regard digital wallets as essential to their experience, highlighting the importance of payment flexibility for global travel merchants. Our own research with Phocuswire suggests that the conditions are increasingly favorable for further AFP adoption across the travel industry.
Ceptor: Add AFPs with Flexibility and Speed
As AFPs become more central to airlines’ and travel merchants’ payment strategies, the need for a payment solution that facilitates the implementation and activation of these methods becomes more acute. Ceptor®, UATP’s Gateway Orchestration Layer solution, enables airlines to securely and easily connect to more than 300 AFPs worldwide. With just one connection to Ceptor®, airlines can activate new AFPs whenever and wherever they are needed and expand into new markets in support of passenger and market demand. Airlines and travel merchants benefit from direct settlement, full automation and global coverage, offering customers the choice to pay in their preferred way.
The implementation of Ceptor® has demonstrated significant benefits for airlines and travel merchants. By streamlining the AFP onboarding process, airlines can adapt to changing market conditions, enter into new markets and meet evolving passenger demands more effectively.
Traditional Card Payments Aren’t Going Anywhere
Despite the growth of AFPs, traditional card payments remain a cornerstone of travel industry transactions. Credit and debit cards continue to be the preferred payment method for a significant portion of travelers, particularly in established markets.
Global card transaction volume for airlines and the broader travel industry remains substantial. Around 70% of the approximately 2.9 billion global airline booking payment transactions are made with a debit or credit card, underscoring their continued importance in the payment ecosystem.
This persistent dominance of card payments means that travel merchants must maintain robust card processing capabilities and find new ways of increasing efficiency in this critical payment channel. One way to achieve this efficiency is by utilizing technology to sidestep the limits of batch processing.
UATP’s Next-Generation Parsing Engine
UATP’s patented parsing engine enables all transactions under the IATA Billing & Settlement Plan (BSP) and ARC (Airlines Reporting Corporation) to be submitted to acquirers individually, as opposed to in batch format, which is the current standard for payment processing across the globe. By removing the constraints of the batch format — in which one file can delay the processing of an entire batch of payments — transactions can be processed much more quickly and efficiently, resulting in increased cost savings and fewer processing lags. Individualizing transaction transmission also allows for more granular control and dynamic routing of sales, a key advantage for UATP One merchants.
This innovative technology represents a significant advancement in payment processing efficiency. According to UATP, the implementation of their parsing engine has demonstrated transaction processing time reductions of up to 60% compared to traditional batch processing methods. The technology was granted a patent by the US Patent and Trademark Office in 2022, reflecting its unique approach to solving long-standing payment processing challenges.
The UATP Advantage
Both of these transformational technologies — the AFP gateway and the parsing engine — are available through one payment partner: UATP. This makes UATP the ideal partner for airlines and travel merchants that want to boost efficiency with their current payment processes and embrace the flexibility and forward-thinking they need for the future.
By integrating both traditional payment optimization and AFP expansion capabilities, UATP provides a comprehensive solution to the payment challenges facing today’s travel industry. Airlines working with UATP have reported substantial reductions in payment processing costs while simultaneously expanding their payment acceptance capabilities.
As the travel payment landscape enters yet another period of transition, having a partner capable of addressing both current needs and future opportunities will be essential for sustained success.
UATP’s dual approach to payment transformation positions them uniquely in the market, offering travel merchants a path to improved efficiency today and expanded payment capabilities tomorrow.
