The current range of payment methods has a significant impact on airlines’ working capital; credit card interchange fees alone are averaging around US $8 billion/year, not including charge backs and fraud-related costs. These costs are forecasted to increase significantly in the coming years. (Source: Phocuswright)
IATA is addressing these issues in the evolving payments landscape by creating IATA Pay, a solution leveraging trends such as open banking, request-to-pay and real time payments.
Regulatory initiatives such as the EU’s Payment Services Directive 2 (PSD2) are encouraging the development of new solutions such as bank account to bank account, real time payment and request-to-pay services.
At the same time, the adoption of immediate payment solutions is becoming global. Some cashless alternatives such as Unified Payments Interface (UPI) in India are becoming popular and a mandatory offer in some jurisdictions.
IATA Pay leverages these developments to enable airlines to offer their customers a direct payment solution when purchasing airline products and services online. It is real-time, safe and cost-competitive compared with existing payment options.
During the COVID-19 crisis, airlines have confirmed their strong demand for the IATA Pay initiative. Following the successful development and testing of prototypes in the United Kingdom and Germany markets, IATA is happy to announce the first go-live will happen late in the first quarter of 2021.
Watch this space for further developments.
IATA Pay aims to create an alternative payment solution which will be cost-effective, highly secure and optimize cash flow.
To airlines, IATA Pay advantages are:
- Cost-effective payment option, reducing at least 90% (*) of payment cost compared to other payment options.
(*) IATA Pay average estimations. Savings may vary depending on transaction value and current average payment cost.
- Highly secure, having IATA as trusted acquirer with no chargebacks or holdback practices
- One technical integration giving access to all available markets.
- Single contractual relation with IATA, managing risk exposure to service risks.
- Control of payment aspects such as customer’s payment information.
- Simpler payment process, enabling Airlines to design a customer end-to-end shopping experience.
- Faster cash flow to the merchant
- Optional white-labelled payment method.
- Transparent price structure
To consumers, the benefits include:
- Highly secure
- Enhanced consumer shopping-experience with seamless payment.
- Increased number of payment options
- Opportunity for airlines to introduce additional features focused on demand restoration such as pay later, cash-back rewards and payment insurance.
IATA Pay is a form of payment whereby the funds are debited instantly from the customer's account and credited to IATA's account.
IATA offers the added value services of settlement to the airline in 24 hours, reconciliation, refund management and an administrator portal. Other services under analysis include instalments, insurance or facilitating rewards methods like cash-back
Find out more about the high level transaction flow for Airline web ticket purchase (pdf).
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