Airlines take in $977 billion in payments, according to a study by Edgar, Dunn & Company, including fares, ancillaries, taxes, and refunds.

The cost of accepting these payments is $20.3 billion, or 2.2% of the total payment amount. This mostly comprises fees that include fraud prevention, operational costs, and cash flow—if there is a delay on payment then there is a cost associated with that.

Airline focus has traditionally been on these costs and especially the fees paid to card providers, the single biggest component. This has led to a debate on new payment methods that offer customers alternatives and potentially offer an opportunity to airlines to reduce cost.

The truth is that cards are here to stay. They remain the most popular form of payment in most regions, and they are appropriate to a global industry.

“Looking at only cost is a very limited view,” says Natasha Ansell, Vice President, Head of Visa Business Solutions for Central Europe, Middle East and Africa at Visa. “The fact is that nobody will continue paying for something that delivers no value. And, for consumers and airlines, cards add value.”


The convenience of cards

To begin with, cards offer convenience, instant authorization, and security to customers. They know how cards work, and they trust them. In many cases, the use of cards is tied to airline loyalty programs so there are additional benefits too. That is a huge boost to airline sales. It is unlikely the customer will be put off a purchase by the card payment process. Airlines, meanwhile, will know the payment is going through and when they will receive the money. That is a huge asset to financial planning.

It is also worth noting that there are about 10 touchpoints in a journey from the initial ticket purchase through to buying a coffee or sandwich onboard the flight. A card will always be appropriate but other forms of payment may have challenges depending on the environment. Perhaps Wi-Fi isn’t available, or cash can’t be accepted.

“Then you have to consider all the information a card payment gives you,” says Ansell. “Where was the payment made, when, and in what category of spending? If you think about driving revenues and cross-selling, you do that by understanding the customer and making a relevant offer. A payment by card gives you that understanding.”

New payment methods offer an abundance of data, too, but they have their limitations. The advent of such services as Buy Now Pay Later are unlikely to challenge the prevalence of cards in the near term as they are not yet as ubiquitous as cards on a global scale, for example. Also, security and trust remain critical as travel adapts to a digital-first reality. The rapid growth of digital money movement requires a new security approach. That is why Visa has spent $9 bilion in the last five years to boost cybersecurity and reduce fraud.

Consumers and businesses increasingly expect transparency, speed, and simplicity when making or receiving payments. Data, security, and an expanding ecosystem of partnerships are paramount to global innovation. Visa, for example, has made a number of new acquisitions, including Tink, an open banking platform.

Another development is the acquisition of Currencycloud, a business that provides complete transparency on an opaque aspect of sales. Airlines are usually global businesses and make sales in a variety of currencies. Customers, too, often buy in currencies with which they are not familiar and want the exact price to be clear. Currencycloud enables clients and partners to offer digital-first travel payment solutions, including multi-currency wallets and real-time notification of exchange rates.

“The main point is that a card is not a piece of plastic,” Ansell concludes. “We must get past that image and think of it as the best form of digital payment available to airlines.”


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