Alternative Payment and Distribution Landscape: Airline Distribution Channels

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1 Alternative Payment and Distribution Landscape: Airline Distribution Channels

2 Contents Introduction 04 At a glance 05 Setting the scene 06 Mobile payments 08 The challenges of mobile 10 The social media opportunity 11 The challenges of social media 12 On-board payments 13 Self-service kiosks 14 Conclusion 15 About this whitepaper 16 3

3 Introduction At a glance This whitepaper looks at the trends and challenges of distribution channels in the airline industry. It follows two previous whitepapers that discussed the motivations, challenges and developments in the airline alternative payment landscape. About WorldPay WorldPay is a leader in the payment industry. It provides airlines with a full payment service from international acquiring, processing, alternative payments and treasury services to risk management. WorldPay offers payment coverage in 181 countries across all distribution channels with the widest choice of payment types. 83% of airlines think improvement and deployment of new payment technology is a business priority 71% of airlines believe the future of airline payments lies in mobile Social media is a high potential sales enablement channel for airlines A key trend to watch out for in the next two years will be how inflight connectivity will help facilitate payments Part one Airlines going alternative Part two Airlines and alternative payments: The facts Part three Airline distribution channels 4 5

4 Setting the scene Airlines need to manage a complex system of payment currencies, types and distribution channels. Passengers can book tickets in one country from an airline based in a second country, to fly to a third country, pay in the currency of a fourth country, sometimes in the preferred payment method of a fifth country. To support these requirements, carriers need to work with a payment provider that offers global coverage across various distribution channels. Airlines recognise that improving payment technology is vital to remaining competitive. Respondents in our survey identified developed economies such as the United States, United Kingdom, Canada, China and Germany as their main markets. Mobile, social media and on-board payments are key focus areas over the next two years. Mobile payments are carried out through a browser or app or using a mobile device. Social media includes global sites such as Facebook, LinkedIn and Twitter, and domestic sites such as Sina Weibo in China. On-board payments enable travellers to purchase products and services such as duty free items, luxury goods, food and drink, seat upgrades and other merchandise. Inflight connectivity is becoming a priority for passengers and carriers are turning their attention to enabling on-board payments. 83% of carriers say new payment technology is a major priority Self-service kiosks are stand-alone computer terminals through which airline passengers can perform actions before boarding their flight, such as checking in baggage, choosing seats, printing boarding passes or purchasing upgrades. The next section will explore trends and challenges of these channels. 6 7

5 Mobile payments Customer demand, industry competition and increased revenue are driving mobile airline payments. Over the next two years, airlines will use mobile services to offer more ancillary purchases. Services offered via mobile Now Plan to implement in next two years Check-in Ancillary sales Buying baggage allowance With more than three quarters of the world s population now having access to a mobile device*, there are plenty of opportunities to utilise this channel. Airlines state that mobile payments offer external benefits for passengers but also improve internal processes such as data submission and handling. Our survey asked airline respondents which services they currently offer via mobile payments and which services they plan to offer in the future. The majority of airlines already offer mobile check-in facilities and many offer mobile flight bookings. 67% 71% Making flight bookings 28% 42% Ancillary sales Buying an upgrade 49% 21% 71% of carriers believe the future of airline payments lie in mobile 50% of airlines see mobile payments as a way to keep up with competitors 50% 47% 71% 50% 49% Manage your booking 7% Paying for onward travel Airlines accepting mobile payments has risen from 10% in 2012 to 25% in % % of airlines see mobile payments as a way to increase revenues 45% 55% 33% Paying for a flight 28% 5% Buying inflight duty free goods 25% % 20% Ancillary sales Reserving a seat Buying inflight food and drink to consume on board 28% 2% 55% 26% * World Bank figures 8 9

6 The challenges of mobile The social media opportunity Whilst the opportunities are clear, mobile payment services pose some challenges for airlines, such as: - Increased fraud risk - Mobile platform diversity - Lack of integration The risk of fraud: Few consumers have security software installed on their mobile device. This makes it difficult to determine if they are the legitimate owner of the account linked to their chosen payment method. Integration: Legacy systems implemented before the availability of mobile payments may not support new payment platforms. Airlines need to take this into consideration when implementing mobile payment solutions as system upgrades can be costly and result in downtime where no payments can be made or received. Mobile platform diversity: Device manufacturers use different operating systems (e.g. Apple ios vs. Android), and older devices run varying versions of the software (e.g. Android Jellybean vs. Android KitKat). As a result, customers have slightly different user experiences depending on the device and operating system they use, making it difficult to create a one-size-fits-all solution. Challenges posed by mobile for airlines The risk of fraud 65% Integration with current systems and processes 65% The diversity of mobile platforms and operating systems 63% Payment security Data security 51% 44% Availability of resources for implementation 37% Cost to implement 30% Insufficient evidence for ROI 23% Availability of resources for customer support 12% Lack of customer demand 12% Selling in to the business internally 7% Less visibility due to outsourcing/partnering 7% Customer understanding and/or enabled equipment 7% Innovation is driving new ways to sell through social media channels. 29% of airlines are planning to enable sales through social media channels. Airlines plan to use Google+, Twitter and LinkedIn as well as Facebook over the next year. Current vs future social media payments Currently enable sales through Plan to enable sales through in the next 12 months 12% 11% Many carriers already have a presence on global social media sites such as Facebook, LinkedIn and Twitter. Over the next 12 months, we will see airlines increase usage on global sites and domestic social channels like Sina Weibo in China. KLM Royal Dutch Airlines have already developed a payment method which allows customers to make payments through Facebook or Twitter. KLM passengers can book flights, make seat reservations and arrange extra baggage using this method which shows innovation in this area. 40% of airlines plan to be active on Google+ in the next 12 months 5% 2% 2% Facebook Twitter Google+ 7% 10 11

7 Challenges of social media On-board payments Whilst airlines see potential in using social media as a sales enablement channel, there are a number of challenges such as: - Lack of control - Availability of resources - Difficulty of integration Lack of control: Social media is fast moving and less controllable than traditional channels. As a new sales enablement channel there is a lack of experience in this area. Resourcing and integration: Nearly a quarter of airlines cite concerns about the level of customer comments and complaints invited by social media sites. They need more people to manage their social media presence and provide the right level of customer support. As social media is a new sales enablement tool, integration with current systems raises concerns. Social media challenges for airlines Controlling it as a distribution channel 45% Integration with current systems and processes 45% Availability of resources for upkeep and maintenance 31% Availability of resources for customer support 29% Availability of resources for implementation 29% Level of customer comments / complaints 24% Cost to implement 24% Insufficient evidence for ROI 21% Selling in to the business internally 21% Connectivity is a priority for passengers. Demand for internet connectivity is driving low cost carriers to expand the on-board services and payment methods they offer. Traditional carriers are looking to offer more duty-free and luxury goods. Cards are still the most popular payment method used by passengers to pay for goods and services on-board, followed by frequent flyer and loyalty points. E-wallets are growing in popularity 18% of airlines plan to accept them in the near future. 5% of airlines accept mobile payments on-board flights - this is set to rise to 36% in the next two years Inflight services that low cost airlines will offer in the next two years Inflight internet usage Inflight telephone usage Other 45% 27% 18% 55% Other inflight merchandise Inflight upgrades 10% None of these 27% Lack of customer demand 14% None of these 5% 12 13

8 Self-service kiosks Conclusion Mobile is overtaking self-service kiosks as an investment priority. Self-service kiosks are becoming less of an investment priority for airlines. At present, 29% of airlines are investing in mobile payments while just 17% are investing in kiosks. This is due to a number of perceived challenges. These include the cost to implement and maintain them, difficulty integrating with current processes and the inability to read a chip and PIN card. Kiosk investment Currently 29% 31% 29% 24% Whilst investment in kiosks is set to reduce over the next two years, many respondents still plan to implement additional services at kiosks, including check-in and seat reservations to improve overall customer service. 42% plan to sell upgrades via kiosks in the next two years and take advantage of other upsell opportunities such as paying for onward travel. 40% of airlines say kiosks will be less important in the future The next 12 months will see important changes that will improve the passenger payment experience in the airline industry. Airlines consider improving and deploying new payment technologies as a key business priority. They are seeking to better align payment offerings with customer expectations to stay ahead of competing airlines. Mobile payments, social media and on-board payments have been identified as key areas of growth to help airlines gain a competitive advantage, with self-service kiosk investment declining. It s no surprise that airlines are focusing heavily on mobile as both a distribution channel for services and as a means of payment - 71% say the future lies in mobile. Mobile brings challenges, including the issues of fragmented platforms and security, but airline carriers can t afford to ignore this high-growth channel. Social media is a growing sales enablement channel channel Facebook is most actively used by airlines and trends show that many airlines are planning to push sales through social media in the near future. The rise of inflight connectivity can only be good news for airlines as it will increase the range of on-board services that can be offered. Airlines have highlighted on-board payments as a key growth area and are currently working with or looking for suitable on-board payment technology partners. WorldPay is a leader in airline payments. We work with some of the world s largest carriers to maximise their global reach and improve transaction rates. Our suite of exceptional payment products combined with our knowledge of the airline industry can help any carrier to improve their payment process. We cater for all distribution channels and support airlines to widen their range of payment methods with our award-winning alternative payment portfolio. Contact us: dropusaline@worldpay.com or visit /airlines Investing more effort in developing kiosk services Investing effort equally in kiosk and mobile services Investing more effort in mobile devices Don t know 14

9 About this whitepaper The research study was carried out in May-July 2013 and covered 68 traditional and low cost global airline carriers. 34% of the sample airlines are headquartered in Europe, 22% in Asia Pacific, 21% in North America, 13% in the Middle East and Africa, and 10% Latin America. All statistics in this report are from this research unless otherwise stated. This document is proprietary to WorldPay. The information provided herein is provided on an as-is basis for information purposes only, and WorldPay makes no warranties of any kind in relation to the content or suitability. Terms and conditions apply to all our services. WorldPay (UK) Limited is a company registered in England number Registered office: 55 Mansell Street, London, E1 8AN. WorldPay (UK) Limited is authorised and regulated by the Financial Conduct Authority under the Payment Services Regulations 2009 (Register No ) for the provision of payment services. 16

10 For more information, please or visit /airlines Copyright 2014 WorldPay. All rights reserved.