Aticket purchase transaction plan being developed by IATA could save carri- ers from annual credit card transac- tion costs and make it easier for passengers to buy tickets directly from airline websites.
IATA Pay provides a framework for debit transactions
in which payments are made from the customer’s bank
account directly into the airline’s bank account. Te European Commission’s second Payment Services Directive and the UK’s Open Banking Regulation make the
industry-supported initiative possible.
IATA Pay was tested in January, in partnership with
ipagoo, a UK-based fnancial technology/digital bank,
part of the Orwell Group.
Te role of IATA is to help create the infrastructure
for the payment to take place. Cathay Pacifc Airways,
Scandinavian Airlines (SAS) and Emirates Airline have
beta-tested the system, and more testing is planned for
March and April.
IATA is coordinating with Deutsche Bank on a prototype for Europe that would launch in the German market. If the tests are favorable, IATA and its technical partners will extend IATA Pay to other European countries
and “two or three countries outside of Europe, which
could include India, Hong Kong and Australia,” IATA
director-fnancial and distribution services Juan Antonio
Te genesis of IATA Pay began over a year ago when
the association saw changes in European banking laws
that allowed for open banking, providing opportunities
for airlines and travelers. Airlines collectively
pay around $8 billion annually in credit card
fees and IATA Pay could cut those costs consid-
erably, as well as help reduce credit card fraud
and expedite cash fow to the airline, IATA says.
“We have been working closely with IATA
and other stakeholders in Germany to test and
validate the various processes involved in payment and refund processing, as well as business
integration and implementation. Work has
focused on both the technical aspects, as well
as ensuring the solution ofers a seamless user
experience,” Emirates SVP-group fnance Michael Doersam said.
Cathay Pacifc said IATA Pay would be a
win-win solution for airlines and passengers,
and urged its adoption.
“As well as being another payment option,
IATA Pay is a more secure method of payment. Custom-
ers do not need to disclose their [credit] card details,
while for airlines, the payment transaction is fraud-free
and there is no risk of chargeback,” the Hong Kong air-
line said. “Total payment costs represent a signifcant
percentage of an airline’s distribution costs. We expect
IATA Pay can help airlines lower this cost and hope it can
go live as soon as possible.”
SAS is similarly hopeful. “Te main beneft that open
banking might bring is a consistent, safe and easy way
to interface for customer payments,” SAS spokesperson
Freja Annamatz said. “Te challenge is the vast range of
payment options available in various markets.”
Tough not participating in the initial tests, American
Airlines said it is continually looking for ways to improve
the payment experience and is looking forward to review-
ing the results of the IATA Pay pilot program.
“Tere is a certain sector of travel buyer that may be interested in this plan,” Universal Air Travel Plan (UATP)
president and CEO Ralph Kaiser said. “However, the
product will likely require material incentives to gain
adoption, which the airlines will be expected to fund. I
believe the challenges will be around refunds and nonperformance. Tere is also extensive execution risk.”
UATP is global corporate travel payment solution
IATA’s open banking initiative
aims to offer a new method
to purchase tickets
BY ROBERT MOORMAN