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.”
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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.