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owned and operated by airlines.
IATA Pay is not likely to have a material effect on
traditional or alternative payment brands in the short-to-medium term, Kaiser said. Airline-sponsored credit
cards, which provide reward points for future purchases,
remain popular with air travelers. Asking passengers to
relinquish these credit cards without some reciprocal
benefit would be a difficult proposition.
“From an airline perspective, this [IATA Pay] plan is
manna from heaven,” Hamlin Transportation Consult-
ing’s George Hamlin said. “But if airlines don’t share this
bonanza with the consumer, it may not succeed.”
Southwest Airlines, which is not an IATA member,
said this automated clearing house (ACH) ticket pur-
chasing initiative would have to deliver value for con-
sumers, banks and merchants to even be considered.
“It could be that the IATA-sponsored ACH product
doesn’t achieve as much success in the current market
conditions because US banks are more likely to develop
products that maintain the status quo and protect their
world-leading debit/credit interchange fees,” Southwest
senior director-corporate insurance and payment strategy
Chris Priebe said.
He added there could be more ACH alternative product interest from US banks subject to regulations of the
so-called Durbin Amendment, which monitors banks
with more than $10 billion in asset value and are therefore subject to lower debit interchange revenue.
“Tese banks may find it easier to cannibalize debit
card transactions with an ACH product that drives great-
er value to the bank/consumer,” Priebe said. “We could
see US banks trying to leverage bank-owned platforms,
such as peer-to-peer ACH platforms like Zelle, and a
logical extension of this product could be consumer to
For more than a decade, Southwest has partnered with
PayPal Credit, but continues to consider the viability of
partnering with other bank and telecom wallets in the
Priebe said airlines also must consider the value credit card holders place in their airline rewards programs.
“Te value proposition for these cards is far greater
than any conceivable incremental efficiency or safety
value proposition that could be offered via ACH and
IATA Pay,” he said.
Credit card company Chase offers products through
the co-branded Southwest Airlines Rapid Rewards
IATA Pay should not be confused with IATA EasyPay, a
core element of the association’s New Generation of IATA
Settlement Systems (NewGen ISS). While their names
are similar, they are different products intended for different markets. IATA EasyPay is a “pay-as-you-go” solution
based on the e-wallet concept.
EasyPay provides travel agents with another method
of issuing tickets via the IATA’s billing and settlement
plan (BSP), whereas IATA Pay is for direct purchases
from an airline’s website where no agent is involved, Rodriguez said.
IATA’s BSP is designed to facilitate and simplify the
selling, reporting and remitting of IATA accredited passenger sales agents and improve the financial control and
cash flow for the association’s 400 participating airlines.
With IATA Pay, there is no e-wallet that requires a
prefunding mechanism. Payment is made directly from
the customer’s banking account.
“Both solutions might look similar, although they are
radically different,” Rodriguez said. “IATA Pay utilizes
transactional rails for moving funds versus card scheme
rails utilized by debit cards. IATA Pay is a payment plan
based on account-to-account bank transfers leveraging
on the current open banking landscape.”
A barrier to IATA Pay in the US market is the inabil-
ity of third parties to obtain consumer information from
conventional banks. Information is restricted by US gov-
ernment regulations, which do not allow open banking.
Te issue has been discussed by lawmakers, but no prog-
ress has been made.
“When you look at Europe or Australia, for example, or potentially Canada and Mexico, these are
countries that are driving open banking initiatives
with regulators or government bodies at the table,”
said Jane Barratt, chief advocacy officer at MX, a
Utah-based company that provides data to financial
institutions. “Tey generally start with the goal of
increasing privacy and putting control over data into
the hands of the consumer. A significant amount of
the conversation centers around interoperability—or
technical standards—policy issues, such as liability
“We believe that positive consumer outcomes
should be at the center of the conversation. As the industry evolves beyond data sharing and more into direct payments, there are significant opportunities for
cost savings across the board.”
“From an airline perspective, this
plan is manna from heaven.”
George Hamlin, consultant