This article summarises how airlines’ payment policies are evolving over time and which factors define them. It also illustrates common pain points related to costs of payment acceptance, market reach, and payment conversion, as well as describes potential solutions based on actual case studies.
In our consulting work with a wide range of airlines across the globe, we have noticed relevant changes in airline payment acceptance policies. Some of these changes have been specially evidenced after the COVID-19 pandemic. Airlines do not only look at their direct sales channels anymore (e.g., airline’s own website, mobile app). They are also increasingly paying attention to their indirect sales channels (e.g., sales through online travel agents or travel management companies via GDS or NDC channels) and realise the importance of proactively managing their payment acceptance function.
More factors are increasingly considered by airlines – including sales geography, payee profile, preferred payment methods, and payment providers that will process transactions. This has led many airlines to avoid blanket or one-size-fits-all payment acceptance policies. They now cater for nuances and remain flexible and adaptable to industry changes.
The payment acceptance policy is the backbone of an airline’s overall payments strategy. It defines the dos and don’ts of what payment methods to accept, where, and how. Consequently, this policy has a direct impact on the performance of key payment areas, such as the cost of payment acceptance, market reach, and payment conversion.
Despite the differences between one airline and another, our two decades of close collaboration with them have revealed several recurring pain points across the three key areas of payment acceptance: cost of acceptance, market reach, and payment conversion.
These pain points and their respective solutions are varied but share some commonalities:
First, data is king, and the lack of data prevents improvements. Access to detailed payment performance data is essential to identify both what is going wrong and the root cause. For instance, one airline headquartered in EMEA had never looked at card approval rates based on the country where the traveller is located, and it was shocked to discover that nearly half of the US-based cardholders who accessed its website experienced card declines.
Second, close collaboration with payment providers is necessary to address problems in a timely manner. For instance, some acquirers have a proactive outreach team that directly contacts large issuers in case of unusual card declines driven by one particular issuer.
Third, client-centric payment strategies are a ‘must’, and they require flexibility and quick time-to-market. Meeting the changing expectations of clients (either consumers, small businesses, or corporate travellers) increasingly requires internal payment expertise and modern payment technology.
Our consulting assistance with airlines across the globe enabled EDC to identify specific pain points and unmet needs for airlines related to payment acceptance, as well as potential solutions:
EDC has developed a proprietary approach called ‘360o Payments Diagnostic’ to engage with all relevant departments within airlines and conduct a holistic review and benchmark of airlines’ payments across all sales channels. This experience has enabled EDC to identify key pain points for airlines and develop solutions to solve them. Demonstrating a compelling return on investment is indeed key to convincing internal and external stakeholders to act swiftly. The high-level case studies per key payment area below illustrate the order of magnitude of the pain points identified, highlighting the need for airlines to focus on these significant topics.
These examples demonstrate that airlines’ payment acceptance policies must be well-designed and constantly reviewed for airlines to remain competitive, support growth, and keep abreast of changes in the payments industry. These best practices allow airlines to optimise payment costs, protect revenue, and uncover new revenue opportunities.
Please reach out to Edgar, Dunn & Company at travelpayments@edgardunn.com if you want to share your thoughts on this article or if you want to arrange an introduction call to discuss travel payments.
The Paypers’ Travel Series includes contributions on topics spanning emerging trends in travel payments, fraud and security challenges, regulatory and tax impacts, risk management and forex, as well as sustainability in the travel industry. For a complete overview of all the contributions featured, click here.
Julia is a Manager at EDC’s Paris office, bringing over six years of strategy consulting experience in the payments and financial services sector globally. She has worked with a diverse range of clients across the payments value chain (e.g., central banks, issuers, acquirers, payment networks, PSPs and processors, merchants), with a larger focus on the retail and travel industries.
Edgar, Dunn & Company (EDC) is an independent global payments consultancy. The company is widely regarded as a trusted adviser, providing a full range of strategy consulting services, expertise, and market insights. EDC’s expertise includes M&A due diligence, legal and regulatory support across the payment ecosystem, fintech, mobile payments, digitalisation of retail and corporate payments, and financial services.
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