How POS Financing Can Make The Friendly Skies Much Friendlier
The family vacation to Disney World. The trip to a best friend’s destination wedding. The retired couple’s once-in-a-lifetime bucket list getaway.
There are all kinds of reasons that consumers want or need to travel. And while the motivations for hitting the road can vary, there is one single economic reality for most of those trips:
They are usually large financial expenditures for the people taking them.
Whether going on the trip of a lifetime or faced with emergency travel, the sticker shock of the journey’s price tag can leave consumers scrambling to minimize costs by flying in the middle of the night, or packing all their clothes into a carry-on to avoid baggage fees. Often, it means the trip can’t happen at all.
In the face of these situations, UATP CEO Ralph Kaiser noted in a recent conversation with PYMNTS and Uplift CEO Brian Barth, it becomes particularly important to offer a variety of payment methods at checkout, including alternative methods like installment financing.
“There is a reckoning among players that they have to do this, and they actually want to do this,” he said. “But a lot of these airlines and hotels are working with legacy systems that are very much like mainframes – so this is going to take innovation and the ability to partner with technology players.”
Players like Uplift – which, in Kaiser’s words, “have done really well in meeting a critical need for the financing of travel payments.”
And beyond meeting a need, Barth noted, the best outcome is when the airline can drive revenue by offering customers a manageable payments schedule that spreads out the cost of the trip over time, enabling them to travel more and driving additional revenue to the airline.
The Front-End Switch
For all the benefits that might be gained from alternative payment arrangements, Barth said, it would be extremely difficult for an airline serving travelers all over the world to independently optimize and integrate their offerings for all customers and markets. Moreover, Kaiser noted, given the nature of airline and hotel technology, building in all those integrations one at a time would be an extremely long road for Uplift, or any player working in the travel vertical.
A long and unnecessary road, Kaiser noted, because UATP is already integrated – and can be used as an access point.
“We allow rapid and simple integration for Uplift to airlines,” he said. “We are sort of the front-end switch.”
Travel, Barth noted, has a whole host of pieces that are entirely unique to the industry. The UATP pair-up, he said, allows Uplift to live up to their core values as a provider of travel finance: “Make it simple, make it work.”
In travel, where thousands of esoteric situations can cause flights to be cancelled or refunded, UATP enables a settlement process that not only works, but works smoothly, securely and consistently, so the flow of payments is not interrupted.
On top of that infrastructure, Barth said, they can directly offer the win-win financing offerings that attract consumers and grow basket sizes.
“There are a lot of global travel lessons to be incorporated here,” he added.
The Installment Traveler
While many lenders focus on one segment of potential borrowers – millennials, super-prime borrowers, students, subprime borrowers – Uplift deals with a little bit of everyone.
“I tell people to stand up on their next flight and look around them – all of those people are our typical clients,” Barth said.
Because Uplift uses their own credit ranking analysis, they qualify more sub-prime and thin file customers than typical lenders, Barth noted, as they are better able to identify risk than FICO. Around 80 percent of customers with a 550 credit score will pay back their loan, he pointed out – the challenge is recognizing them.
But installment borrowers are a broader group than those who have merely been excluded from the more mainstream markets, he added. Some borrowers, for example, are facing expensive travel on a date that cannot be negotiated. They may have perfectly normal access to credit, but would prefer to pay via installments than eat up the majority of their credit line. Or, Barth noted, they have customers booking a $5,000-$8,000 trip who have super-prime credit and plenty of spending power, but decide to take advantage of payment installments to upgrade to “the trip of a lifetime, where they do absolutely everything on their list.”
From the airline’s and hotel’s point of view, Barth said, this is all good for revenue. It helps enable trips that might have otherwise been foregone, and drives ancillary spend so the trip insurance is purchased, the seat is upgraded or the room with a view is purchased.
Moreover, Kaiser noted, as much as travel industry players want to push ancillary sales and maximize revenue to the greatest degree, they also want consumers to have a positive experience. A customer who spends seven days looking at a beach instead of a parking lot is more likely to travel often and invest in the experience.
“Having options around payments is a way to do that,” Kaiser noted. “It gives them a way to have a unique or special travel experience they might not otherwise have had. That is more revenue for the airlines, but is also better for people in general who want to explore the world. That’s something I like about this.”
Barth agreed, noting that happy travelers – and those who feel in control of their spending – are more frequent travelers. And finding ways to build products to create more happy travelers, he said, is Uplift’s next job. That is intensive work – though the efforts will be greatly aided by the $123 million in equity funding Uplift picked up in late 2018.
“If we can continue to make solutions that work and provide huge benefits to the industry, we can help the travel providers as well as the people who travel,” he said. “Creating those great experiences and memories is the reason we’re all here.”
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