Airlines Say Wheels Up To Pay-By-Bank Payments

May 3, 2019 | News

Payments don’t always have to be just about the cards.

That’s the big message being sent throughout the payments world as PSD2 and other FinTech efforts spark innovation and give consumers, companies and other organizations more methods to pay — methods that better match the preferences of those participants, payments that feature more speed and less friction than was often the case before.

And that message is being received by those in the global airline industry, at least going by the joint effort involving the Universal Air Travel Plan (UATP) and Sweden-based FinTech firm Trustly. The two of them operate a program that enables airlines to accept instant online bank payments for consumers’ ticket purchases. The program “gives travelers the flexibility to purchase airfare by using their preferred bank account,” an offering that benefits both customers and airlines, said Rachel Morowitz, vice president, alternative forms of payment at UATP, during a recent PYMNTS interview that also featured Mike Parkinson, general manager U.K./director of travel at Trustly.

The airline industry, like so many other businesses, is coming to realize that consumers are setting the pace when it comes new and preferred payment methods — methods that go beyond traditional credit cards. The airlines see in real time how much the payment market is being disrupted and fragmented with hundreds of emerging methods in various regions, and they see a clear path to a favorable return on investment (ROI) if they accommodate those payment methods.

At least that is the message UATP has been sending recently. Indeed, the organization processed a record number of alternative (non-card based) payments over its platform in 2018, and expects to see that number soar in 2019 and beyond. And those changes are taking place as the larger travel industry becomes much more mobile-focused than it was just a few years ago. Combine such trends with the emergence of PSD2 and open banking, and it’s not hard to imagine even more innovation to come for airline payments.

In this specific case — using bank account payments for purchase of airline tickets, a payment method that has proved popular with non-U.K. European consumers, according to Parkinson — UATP benefits from the networks and bank relationships that Trustly has established on the continent, along with its expertise in relevant security and compliance issues, he said. A general move is afoot to use bank data toward new FinTech innovation, and that trend, he told PYMNTS, will lead to explosive growth of so-called alternative payment methods over the next two or three years — further evidence of which is provided by the adoption of such methods for airline tickets, a major economic force.

The joint effort “allows for quick and simple integration with the airlines” via the Trustly-backed FinTech platform, Morowitz said. “We are really just making the whole process simpler and easier for our airline merchants. One of the great things about this partnership is that our airline merchants are optimizing and leveraging the networks they already have. One simple connection gets them access to all of Trustly’s open banking [offerings] throughout Europe.” And that means faster payments and better customer service, she added.

This type of payment method for airline tickets is very likely to prove less popular in the U.S. and the U.K. than in continental Europe, they both told PYMNTS, because of European cultural preferences that often favor debit and bank account payments rather than credit purchases. But that’s the thing about so-called alternative payments, of course — they are designed to reflect demand for forms of payment specific to markets and cultures, which in turn can increase sales, reduce purchase abandonment and strengthen customer loyalty.

That said, change is possible and, in some case, even likely when it comes payment method preference,  Morowitz said. “Over time, those innovations can certainly make inroads in markets where cards are currently dominant. It’s really about consumer behavior, and any innovation that can shift that behavior is key.”

The drive toward payments innovation is just getting started, with PSD2 and other factors promising much more to come. Already, with the airline industry stretching its wings, so to speak, when it comes to payment innovations, it’s easy to think about other developments just over the horizon.

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