Digital identity to redefine distribution chain

New Distribution Capability (NDC) is the first step towards the evolution of airlines into retailers through a data exchange format based on offer and order management processes.

It enables the de-commoditization of the industry and allows new products to be sold in innovative ways regardless of the distribution channel. The end result is dynamic offer creation, personalization, and a richer customer experience.

But to make the most of this world of offers and orders, airlines need to authenticate the identities of their partners in the distribution value chain. And that will require an upgrade of the existing codes and practices.

“The path to value creation must put the customer in the center of every process involved in the airline industry,” says Stephan Copart, IATA’s Head Digital Transformation. “Airlines who adapt their business models, operations, systems, and culture will unlock opportunities and forge long-lasting customer relationships, based on personalized and engaging experiences.

“Digital Transformation is a critical enabler of customer centricity. Airlines must accelerate their journey to becoming digital retailers, using modern technologies.”

Traditionally, global distribution systems (GDS) sit at the center of an EDIFACT (Electronic Data Interchange for Administration, Commerce and Transport)-based ecosystem.

When a travel agency uses a GDS, it logs in using a seven-digit, human-readable code. The closed environment means it is the GDS that authenticates the identity of an airline’s business partner. Despite existing safeguards around authenticating travel sellers and credit cards, it is estimated that fraudulent transactions cost the industry $1 billion per year.

In this new environment, however, the GDS does not necessarily play the role of centralized gatekeeper. The ability to authenticate all the participants in the transaction thus takes on additional complexity.


Going digital

In a world of offers and orders, the offer is controlled by the airline. That means an airline needs to authenticate the identity of a travel agency, rather than the GDS.

Adapting the existing EDIFACT system to a world in which the offer is controlled by the airline would require the partner (an agency or aggregator, for example) to have a login for each airline with which it does business. The idea, therefore, is for each agency to establish a single unique digital identity that can be used with every airline. In fact, every entity in the distribution chain will have a unique identifier. This digital ID is quite easy to generate using open standards and widely available software or third parties.

Importantly, even if a third-party solution is used to generate an identity, that identity is still controlled and owned by the holder.

The overall aim is to introduce a standard authentication methodology in distribution rather than use the proprietary systems used by each of the GDSs. But there is value in it for all partners, particularly in having a common industry approach to onboarding new parties.

The proposed solution solves a number of challenges. Most obviously, it will help reduce fraud. Airlines will have complete visibility on distribution partners and know those partners are who they say they are.

For both airlines and agencies, it will also reduce the need to manage multiple identities and so make for a more efficient back-office process.

Furthermore, the concept introduces decentralized identity to a business-to-business environment. This works much like IATA codes today, essentially providing a trust framework in which identities are independent and self-owned. Trusted organizations, such as IATA, can then provide accreditation or certification services based on that identity.

Decentralized identities are already becoming commonplace for business-to-consumer platforms. Many governments and private entities use the technology to provide secure access to personal data. Using it in B2B will provide that same mix of security and user-friendliness.

“The travel experience today is driven by airline-centric processes, in a language the customer does not understand, including codes, acronyms, and complex instructions,” says Copart. “Leveraging modern and open technologies, such as decentralized digital identity and verifiable credentials will enable a framework of trust throughout the entire distribution chain. Airlines will be able to digitally identify all their customers and partners, distributing and delivering content for the benefit of a true personalized and seamless customer experience.”


Proof of Concept

IATA is driving a proof of concept (POC) of the technology, and this is expected to be complete within the next few months with a rollout of an initial digital identity service planned to begin by the end of 2022. The POC involves travel agencies, GDSs working as aggregators, and airlines and is based on direction from the Distribution and Digital Transformation Advisory Councils.

Claire Barber, CEO at MATTR, a partner in the digital ID in distribution initiative, says “decentralized identity and verifiable credential technology have huge potential in the aviation sector to reduce fraud, create efficiencies, and improve experiences

“We’re looking forward to seeing the innovation and value that these new tools are used to create for airlines, customers, crew, and distribution partners,” she adds. 

Naturally enough, to maximize the impact of digital ID in distribution, a critical mass of adopters will be required. IATA is leading an effort to set the standards in this space and lower the implementation barriers for all participants.

“Digital identity in distribution based on open industry standards will unlock true value creation,” Copart concludes. “Moving away from legacy coding and building a modern ecosystem and trust framework using decentralized digital identity and verifiable credentials across the entire value stream will require all participants to embark in this journey and IATA’s role is to facilitate this process.

“IATA is also exploring the concept of “Customer as THE reference” that is bridging the B2C and B2B world based on digital identity. Customers will be in full control of their data, can received personalized offers from airlines and consume services effortlessly. This is the path to a true seamless end-to-end customer experience.

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