IATA Pay looks to reduce payment costs for airlines, completes first test

A new payment method for air tickets has been tested with a number of airlines, including Cathay Pacific Airways, Scandinavian Airlines and Emirates.

The first ticket purchase was made via IATA Pay, a partnership between the International Air Transport Association and fintech company Ipagoo.

IATA Pay is an initiative to create a new process for consumers who are buying a ticket from an airline website.

According to a statement, the initiative has been made possible by the European Commission’s Payment Services Directive and the United Kingdom’s Open Banking regulation, which make for a highly secure direct payment from the customer’s account to the merchant account.

The statement says that advantages for carriers in using IATA Pay include a cheaper payment option, faster cashflow and simpler payment processing.

IATA says that consumers expect multiple payment option to be available to them, including mobile and peer-to-peer mechanisms, but that card payment costs amount to some $8 million a year.

Aleksander Popovich, IATA’s senior vice president of financial and distribution services, adds: “A large part of this cost is incurred in direct purchases from airline websites. One of IATA’s strategic objectives is to support airlines’ financial sustainability including controlling costs.”

Research released by Amadeus in mid-2018 reveals that travel companies are slow to invest in payment innovation despite the demand from consumers. The study says that only 15% of travel companies implemented a payments innovation in the past three years.

Travel companies cite payment processing complexity and cost of payments as barriers to innovation. The study shows airlines spend 4.2% of revenue on payments.

Carlos Sanchez, CEO of Ipagoo, says: “Ipagoo’s technology provides a secure, multi-country banking service for IATA.”

IATA is also working with Deutsche Bank on a prototype for Europe (excluding the U.K.), which is expected to be tested early this year.

The hope is to expand the concept to other regions.