Ai Editorial: Gearing up for a spate of 3rd party mobile wallets

Ai Editorial: A mobile wallet is capable of addressing challenges related to the cost of payment, merchant fraud liability and the speed of checkout. Ai’s Ritesh Gupta assesses how airlines can embrace such emerging option smoothly
First Published 8th February 2016

The task of dealing with emerging payment options can’t be ignored. For instance, Apple Pay’s issuer total is already beyond 825 or so. As concerns pertaining to whether transactions via this mode are sizable enough or not get reduced, the focus is on ascertaining how to make the most of mobile wallets’  simplicity/ user experience or role in the booking funnel.

Airlines have to work out a way to handle proprietary functions and features of each of emerging mobile wallets, and this is in addition to existing multiple payment methods as well as sales channels.  

As a specialist, Denmark-based Vivek Bhatnagar, VP Presales and Solution Architecture, CellPoint Mobile points out that the primary challenge for airlines is to understand that there is no unified approach to improving or prioritizing the complex, costly and constantly changing payments ecosystem, and that challenge exists for any merchant or retailer. He says no single payments vendor can solve the complex jigsaw puzzle with a comprehensive solution.

Being ready

Whenever a new payment method like Apple Pay, Android Pay or Samsung Pay launches an airline or a merchant needs to talk to their PSP or acquirer to support the same and the foresaid payment method may or may not be the immediate priority of the PSP or acquirer. However, if the airline has its own payment layer then it can connect to the PSP which supports the payment method or even connect to the acquirer that supports the payment method directly.

As a result, as Bhatnagar also asserts, it’s imperative for airlines to have a thin but feature-rich and agile payments layer within the enterprise that can talk to or integrate with best-in-class external solutions.

With that flexible framework in place, airlines can enable easy on-boarding, omni-channel payments, multiple PSP/acquirer connectivity, independently stored PSP payments, APM aggregation and improved acceptance rates.   

“Each of this features give the airline the agility that is required to increase and protect revenue in the new digital age where the battle will be fought on speed and service. For example, markets like Singapore/ China where Android is the prevalent Mobile OS, having Android Pay and omni channel responsive UI experience  will be the make or break decision with regards to the success of your mobile payment strategy,”  says Bhatnagar.

Fragmentation in mobile payments

Apple Pay, Android Pay and other alternate mobile payment methods are expected to pose a major challenge to PayPal. Even though there have been discussions around how a new entrant can enter the transaction pie that features the merchant, issuer, acquirer and the card scheme, value is being created for the consumer.

Ultimately, the mobile payments ecosystem is going to be very fragmented, and this fragmentation is a reality that airlines must embrace and support in order to provide a wider range of solutions that customers will most easily adopt.

Bhatnagar says merchants need to take control of their payment ecosystem by owning their own payments layer that can deal with the fragmentation. 

“Having a thin agile payments layer will give merchants the flexibility to tap into various sources using similar technologies like XML,” says Bhatnagar.

This provides merchants with an insulation layer from the complex dependencies of supporting different mobile operating systems and payment mechanisms from multiple external providers.

According to specialists, in practice, merchants with their own payments layer have a distinct advantage over those relying on external providers as they are able to rapidly adopt new mobile payment methods, and develop the perfect cocktail of payment methods and providers that matches the needs of their customers and the markets they operate in.

From customer experience perspective, omni-channel enablement is what can make or and break a sale. Airlines must provide seamless booking and payment experiences across all channels to match passengers’ behavior. For example, a traveller might search for a fare on a laptop at work, compare options on a smartphone on the way home, and purchase a ticket on a table at home that evening. Omni-channel enablement makes that three-stage process a smooth one.

eWallets were invariably part of retail giants, such as Alipay (Alibaba) and PayPal (eBay).

But now the space is evolving, with bank and network wallets emerging (Visa Checkout, MasterPass and ChasePay).

Bhatnagar acknowledges that VISA, MasterCard, Amex and Chase are all getting into the e-wallet space. 

He says, “The idea is to offer ease of payment and bring about  one-click payment readiness to the payment process. Businesses like VISA and MasterCard want merchants to continue to visibly use their brands in the new era of payments and are therefore aligning with e-wallets.”

Talking of Apple, Samsung and Google, these organizations are trying to step up customer ‘stickiness’ by integrating their technology into their consumers’ everyday lives. What should airlines take note of with reference to Apple Pay, Samsung Pay and Android Pay? And what should airlines avoid as far as these applications are concerned?

“Airlines are primarily merchants and they should  ‘endeavor to embrace’  and adopt a nimble, agile but reliable payments platform that enables a suite of solutions,” recommended Bhatnagar. 

The good news is most of the streamlining has been done by the providers themselves, an approach that eases issues with traditional payments.  “In our experience, a stored payment solution, when implemented with mobile-based APMs such as Apple Pay and Android Pay, can bring in considerable  incremental sales via the respective mobile apps,” shared Bhatnagar.

Follow Ai on Twitter: @Ai_Connects_Us

Ai Editorial: Payments in omni-channel environment – what to watch out for in 2016

Payments in omni-channel environment – what to watch out for in 2016

Ai’s Ritesh Gupta takes a detailed look at 13 key issues and developments, including IT infrastructure, NDC, data strategy, fraud, security etc. that airlines need to keep a tab on.

Mobile wallets, wearables, QR codes, in-store, self-pay kiosk, PC, tablets, bitcoin…the list of existing and emerging touchpoints and encompassing technology that can facilitate a transaction continued to get prolonged in 2015.

On top of this, the possibility of identifying a passenger every time they get in touch with a brand is forcing airlines, OTAs and the travel sector on the whole to go for a flawless payments strategy.

And the story doesn’t end there.

Customer experience, backed by data and analytics, is just one aspect.  So if the choice of payment just the way a traveller needs is one side, evaluating legitimacy and tackling fraud in real-time is the other side.  

So in 2016, airlines would need to act swiftly to keep up with the pace of change in this arena. Here we explore top developments and issues that are important for offering a sublime experience and fraud management:

  1. Being in control via ownership: Airlines need to own their own travel ecosystem. It’s important for airlines to look at the entire payment chain, from gateway to risk, to acquiring, and identify areas in which they can prioritize improvements. Airlines need an infrastructure that lets them manage complex payments ecosystems, passenger smart devices and other vendors, and not be managed by them.  Dealing with multiple channels, devices and operating systems, multiplied by the many payment methods and consumer digital wallets is difficult. With rising complexities, the industry needs to take control of the transaction, and they need the flexibility to add or remove payment service providers, depending on local market conditions, behavior of the traveller etc. Airlines need to gear up for an integrated solution for the entire payment chain, as well as support alternative payment methods, and look for a single line of reporting and reconciliation.
  1. Airline IT set up: In case airlines are using legacy systems, there is a need to overcome limiting capabilities of such infrastructure. Importantly, it ends up being an investment decision. As specialists point out, airlines need an extraction layer that can orchestrate new payments methods, reduce time-to-market and reduce the costs of supporting those transactions and methods across the various digital channels including mobile. A mechanism is worked out taking into consideration all the sales channels and this layer deals with one or more payment service providers, and streamlines operations such as multi-acquiring switching, alternative forms of payment, reporting etc.
  1. Gearing up for NDC: NDC is fine, but are airlines ready to offer a better payment experience? There are several dimensions that need to be considered as airlines move toward selling products in a different way. One of the most complicated aspects that need to be addressed is the authorization and settlement of a transaction, featuring multiple players (could be two airlines or even other suppliers such as hotels, car rental etc.). Considering the complex payments landscape, it isn’t going to be a straightforward process to optimize the payment experience.
  1. Consistent experience: For a traveller, airlines need to focus on areas like cross-channel seamlessness and un-broken transactions. One can’t do without simplifying the pathway to purchase. The role of analytics and user experience design can’t be underestimated. If we talk of mobile, the shopper flow is often compromised at the payment stage by two key failures – a clunky look and feel, and multiple steps to complete the purchase. The user journey must have no barriers, and airlines must support seamless journeys by using one-click and simple-click functions for authentication and security measures that are handled in the internal environment
  1. Data strategy: Combining external data with internal data gives airlines a much better view of the passenger – better security, better authentication, a better passenger journey and a big-picture understanding of what’s happening on a per-passenger basis. It is important for airlines to capture data across all payments channels through a single integration.

    Identifying travellers across payment channels, and thereby paving the way for a faster check out regardless of location or device they are using, is a clear benefit of an omni-channel approach.

    Once the infrastructure is in place, real-time API’s can deliver information about the payment preferences and behaviour. So be it for simplifying payment page, tailored options (for example, once it’s ascertained that the card user is a German, he or she could be offered a cheaper payment option suited for that nation), stored card details or optimizing for mobile, all can benefit a travel e-commerce brand.

    Also, this would ensure that airlines have the flexibility to switch payment service providers (PSPs) or change data on the outside without locking themselves into a particular provider. Because if payment data is stored with a particular PSP, the airline is ground-locked. Airlines should store data internally or store it with a trusted partner who’s independent from PSPs and other payment source providers, and who not only stores the data and treats it as internal data but also assumes the responsibility of not getting hacked.
  1. Spreading the word: The lack of understanding of how a new payment option can be activated, and coordination between various departments for the same is a major issue. For instance, if we talk of bitcoin, there is curiosity about how this currency works. The only way to generate new bitcoin is by a process called mining, which simply means usage of computing power for validating bunch of bitcoin transactions (also known as blocks). Bitcoin protocol is designed in such a manner that it takes about 10 minutes to validate these blocks. Every 10 minutes a ‘miner’ successfully validates one of these blocks of bitcoin transactions and is awarded 25 bitcoins as incentive for contributing his/her computing power. Since bitcoin’s inception this validation process has been executed many times to produce 14.5 million. It is worth noting that the bitcoin award get halved every four years. This ensures predictable and decreasing rate of bitcoin production.
  1. Local intricacies: An airline might be running operations smoothly, including acceptance of payments, in several markets, but a similar move may result in additional expenditure in a new one. A prime example is alternative form of payments (AFPs). These options have gained traction, and they generally tend to address a domestic economy. It’s a fragmented space, and airlines need to understand intricacies of each market. Consider India. Uber decided to introduce cash option to make it service more accessible in India. So customers can pay via prepaid wallet, debit/credit card or cash.  In case of China, it’s imperative for travel brands to offer options like Alipay and or let Chinese consumer pay via WeChat.

    Also, some local payment options in Asia may require the airline to have local registered entity, especially if the settlement goes directly to airline. A major challenge for accepting payments from customers is the low credit card penetration rate and acquiring bank charging cross border fees to customers.   

    Airlines need to adjust their operations, too. For instance, the settlement process of alternative payment methods can differ vastly. In case of SEPA Direct Debit, one of the preferred payment methods in Germany is asynchronous, meaning that there is no real time confirmation that the funds are guaranteed. As confirmation is given after several days, therefore this payment method should not be available with a short time to fly.
  1. Studying AFPs in detail: Every market has its own requirements. In fact, even within one continent, too, the requirements might differ vastly across countries. Unlike most of the other countries in the Asia Pacific region, options for AFP are yet to take off in a big way in Australia. Carriers in Australia are only focusing on an online real time debit payment system as an option. It allows buyers to use their Internet banking to pay for their online transactions.
  1. Avoiding revenue leakage: Airlines can’t afford to go overboard with 3D secure. Traditionally, online merchants have adopted a binary view to 3D Secure; implement it across all transactions, or don’t implement it at all. However, both of these approaches have problems. If you apply 3D Secure to all transactions, conversion will suffer, and if you don’t apply it at all, fraud will still be a factor. But there is a third possibility – selectively applying 3D Secure only to high-risk transactions, based on data customized to the airline.
  1. Combating fraud: Managing online fraud is an ongoing initiative, one that needs constant improvisation for better results. If this is not the case, then a travel organization would end up being a soft target, leaking revenue that shouldn’t have slipped from its grasp. In fact, despite having a team in place, one can still suffer at the hand of fraudsters. Hackers/ cyber criminals way of functioning continues to evolve. So airlines need to make the most of APIs that can automatically feed threat indicator data into their own security systems. Also, in the current scenario, one must do the detailed review of the past and present transactions and identify in case if there is any suspicious activity happening around. Other recommendations include: Detailed analysis of payment failed transaction; Regular updation of negative and positive data base of the customer; Detailed verification of the high value transactions; More co-operation and collaboration with the fraud departments of airlines / banks and OTA to exchange the fraud trends.

    Also, airlines need to look at machine learning. It promises to combat fraud. One of the best things about using machine learning is that it automatically learns about new fraud patterns in real-time so you don’t have to keep close tabs on new tactics. When patterns of real-time fraud are mapped against examples of past fraud, merchants can accurately predict when they’re seeing a good shopper or a malicious one – so they can block the fraudsters, or make it easier for good customers to buy.

    As for avoiding chargeback debits, there is a need to improve upon dispute management processes for the entire merchant community.
  1. Working with travel agencies: First of all, airlines should look at the weight of indirect distribution in their overall channel mix. Secondly, they must analyze how big of an impact fraud is on this channel – this is often hard to track for airlines because the information they receive in a chargeback may not include reservation details. The lack of automation and the long cycle of a travel agency sale often make it difficult to react quickly. So airlines need to gear up for real-time visibility of all transactions processed via a payment platform. This will allow airlines to have not only a single repository of payment and PNR details, but also enable them to easily take corrective actions on bookings, look at statistics and monitor performance.
  1. Protecting customers: When an organization stores or even makes customers use their credit card details, it puts itself in a position of responsibility. Travellers need to trust that airlines and OTAs are handling their credit card details securely. Now there is an option to transform all credit card details into tokens.  This ensures even if a fraudster accesses stored tokens, there is no method of converting that data back into useful credit card details.The industry is also looking at new options such as biometric verification to prevent fraud as well as make it easier to pay securely.        

Changing payment landscape: In its recent report titled, Omni-Channel Banking The Digital Transformation Roadmap , Efma & Backbase referred to disruptive climate of banking.            

The report referred to what the likes of Apple (in possession of most consumer credit cards,  growing iTunes ecosystem and Apple Pay), Google (Android Pay, sending money via Gmail) and PayPal (handling more international transfers than the top five banks put together) are up to.

There is a need to keep an eye on the functioning of banks, too. It is being highlighted that these organizations are currently in the experimentation or deployment phase of their omni-channel strategy.

Follow Ai on Twitter: @Ai_Connects_Us


 

Ai Editorial: Outsmarting a Fraudster with Machine Learning

Outsmarting a fraudster with machine learning  

Machine learning automatically learns about new fraud patterns in real-time. Can it help in combating fraud? Ai’s Ritesh Gupta finds how it deals with fraudsters 

Travel brands are keenly looking at fighting fraud, revenue leakage and also curtailing associated costs.

In the era of omni-channel commerce, where airlines and OTAs need to embrace various forms of payment methods, companies face fraud on multiple fronts: on top of credit card fraud, merchants must deal with fraudulent accounts, abuse of promotional codes, and spammy content on their websites, like fake reviews or phishing messages. So how to keep a tab on such bad online behavior?

As a specialist, Jason Tan, CEO, Sift Science says machine learning is supremely suited to catching all of this.

“Think about how much customer data travel companies have access to: email addresses, billing and shipping addresses, phone numbers, device fingerprints. You also have behavioral data: the actions a user takes on your site, like where they click and what selections they make,” says Tan, who presented during Ai’s The Airline & Travel Payments & Fraud Summit, held recently in Fort Worth, Texas.

Awareness

Machine learning can quickly and efficiently digest information to identify patterns, so you can start to tell a story about who your users are and what their intent is. When patterns of real-time fraud are mapped against examples of past fraud, merchants can accurately predict when they’re seeing a good shopper or a malicious one – so they can block the fraudsters, or make it easier for good customers to buy.

For example, as Tan says, Amazon uses machine learning to identify its good users and offer them 1-click checkout – a completely frictionless experience.  

Missing the bus

Tan categorically says if travel companies aren’t embracing machine learning for identifying the profile of fraudsters, then they're missing out on effective fraud prevention.

“Travel companies that resist implementing machine learning could instead be experiencing increased sales and better conversion rates by taking advantage of automation. You can use machine learning to create smart and dynamic checkout flows, where known good users can fly through purchasing, while additional friction points (in the form of cardholder verification) can be added for suspicious users,” he says.

Machine learning enables companies to automate aspects of fraud detection and make quicker decisions. Less time spent on manually reviewing orders means that companies reduce their overhead costs and can pass those savings along to their customers.

Consumers booking travel online expect their reservations to go through immediately. Travel companies don’t have the luxury of time; they need to automate parts of their fraud-detection process to stay competitive.

The team at Sift Science referred to several examples:

  • When TravelMob, a member of the HomeAway family of companies, started to notice credit card fraud on their site, their first approach was to manually review new booking requests. Not only was this time-consuming, but it was difficult to scale as their business grew. However, once they implemented a machine learning fraud solution, the TravelMob team became much more efficient. They automated aspects of the fraud prevention process, so the team ould focus only on the bookings that weretruly risky.
  • HotelTonight, on the other hand, experienced a 50% reduction in chargebacks after implementing a smart machine learning solution.
  • OpenTable reduced their manual reviews by over 80% and saved thousands of dollars in analyst man-hours by blocking fraudulent transactions automatically, before they lost any money.

Dealing with a fraudster

The most effective machine learning applications can take in and return information instantaneously, says Tan.

He adds, “For example, say I’m a fraudster that uses an email address like This email address is being protected from spambots. You need JavaScript enabled to view it., and the business figures out that I’m bad because they get a chargeback. Through real-time offerings, jason123 is identified as a fraudster and the system immediately learns that people with 3 digits in their email address are more likely to be fraud. It doesn’t have to be jason123, it could be jason234, jason945, or fred579, but chances are good that those users are suspicious. So when I come back to that company’s site with This email address is being protected from spambots. You need JavaScript enabled to view it. or another fake email address, I would immediately be flagged as “probably a fraudster”.”

Sift Science’s “secret sauce” is its network of customers that send terabytes of data to its servers.

“That means all of our customers can benefit from the same learnings – for example, if we detect a fraudster on one site, that user’s Sift Score (a measure of riskiness) will instantly update across the entire network, so other businesses can block him. This feature enables companies of all sizes and of all locations not only get an individually tailored fraud prevention system, but also stay ahead of new and changing fraud patterns as their customer base grows,” explained Tan.

The data that companies choose to share should be based on their unique businesses and needs. There will be some common fields like departure destination that whole industries share, but there may also be company-specific data.

Global players like Airbnb and HotelTonight are able to use any data points that they already collect in order to benefit from machine learning for fraud. Details like stay length, airplane seat selection, and travel route can offer insights on top of more obvious ones gained from personal traveler information. A flexible machine learning system can take any data you throw at it.

As for visualizing fraud connections, Tan says a bad user might be testing hundreds of credit card numbers or have thousands of fake accounts on your site. “Using the data pulled from every order or transaction sent to Sift Science, we map out the suspicious signals that any given user or order shares with others.”

These connections help to identify why a user might be fraudulent, as well as allow merchants to proactively block users linked to past bad behavior.

Protecting data

It is imperative for travel companies to ensure that attacks don’t affect credit card data as well as any other personal passenger data.              

Unfortunately, it’s getting harder and harder for companies to “ensure” that data stays secure.

Data breaches will soon be the new normal, says Tan.

“Although machine learning can’t stop hackers (yet), it can help travel companies ensure that stolen data isn’t successfully used on their sites. Employing a machine learning solution can actively identify suspicious behavior, and prevent a chargeback for the merchant, and a painful fraudulent purchase for the victim,” said Tan, answering a vital question.

Real-time aspect

One of the best things about using machine learning is that it automatically learns about new fraud patterns in real time so you don’t have to keep close tabs on new tactics. Travel brands rely heavily on online transactions, so there is also a need to watch out for new travellers from new locales. Travel brands need to be mindful that new geographies come with different types of fraudsters and fraud patterns. A pattern may be normal in one region but fraudulent in another, said Tan. Of course, you can’t just block every new traveler; that would be a quick way to lose legitimate business. But leveraging big data to weed out the bad users wielding stolen credit card numbers is key.

Ai Editorial: NDC and Payments

NDC is fine, but are airlines ready to offer a better payment experience?

Ai Editorial: One transaction for a trip, but having separate payment record of each trip element involving a different supplier isn’t an ideal story. Are airlines ready to handle this, especially in the context of traditional card payments, in the NDC era? Ritesh Gupta finds out

The objective of being in control of what a carrier intends to sell sounds like a pragmatic idea. As data-driven personalisation becomes the norm, every airline understandably would like to offer its differentiated, unique product and at the same time something that matches the intent of the traveller, too. Also, airlines have been considering the possibility of making personalised offers to agencies without them being prepared by an intermediary by following the NDC standard.

Payments landscape – dealing with inevitable complexity

There are several dimensions that need to be considered as airlines move toward selling products in a different way. One of the most complicated aspects that need to be addressed is the authorization and settlement of a transaction. Considering the complex payments landscape, it isn’t going to be a straightforward process to optimize the payment experience.

It’s true that the scenario where a traveller shops trip essentials (such as airline seat, car rental, insurance etc.) on one site and pays multiple merchants in a single checkout session isn’t new. 

There are certain aspects of travel that are being streamlined. As it recently emerged, IATA’s One Order industry-led initiative is “intended to modernize the multiple and rigid booking, ticketing, delivery and accounting methods with a single, flexible order management process”. According to the association, accounting “will be based upon workflow of a single order, bringing the industry closer to standard retail accounting principles”.

As for the passenger, the plan is to simplify the experience as travelers will no longer need to juggle between different reference numbers and documents. All they will need is their order reference number to be easily recognized and served by all. 

This ideal cart checkout scenario will create complexity for an airline which must now accept the liability associated with the delivery of the various services being bought. Travellers will appreciate the single cart experience but they will also expect the airline, as the merchant of record for the sale, to service their complaints when a service is not delivered as expected. This is where there is room for improvement, says Global Collect's Laurie Gablehouse, a travel payments specialist

Payment experience – far from being optimized

Let’s imagine a situation. Say you have shopped for US$1500 for your next trip. You have paid $1000 for your air ticket and $500 for your hotel stay. You completed shopping on an airline website at one go. As it turns out, the details of these two components would need to be tracked separately, with separate bills at your disposal.

Why so?

It’s just the way the world of merchants, acquirers, issuing banks and card schemes work.

A lot happens when our card details are used for a transaction. Several stakeholders come into play as our transaction is converted into an invoice. As it stands, without these stakeholders, a transaction can’t be done.  So imagine a scenario where each travel supplier has its own acquirer, and how the world of authorization and billing eventually shapes up today!

“Yes, the liability for the order is why the payment process works in this way.” says Gablehouse, referring to the current scenario.

Considering that there are two parts to a transaction – authorization, and clearing and settlement, where can the situation be improved?

Gablehouse states that it isn’t a technology issue; it’s just the functioning of this sector that is hard to fiddle with. A bank expects the merchant who accepts the payment to be the responsible party for the collection of the funds. If the consumer decides to reverse the payment AFTER the services have been delivered then the merchant is left with the loss. If this was not a service the airline was responsible for delivering, then there must a legal means of recourse to be reimbursed by the third party provider.

Authorization commences when travellers presents their respective cards to the merchant for shopping. In a matter of few seconds, checks pertaining to fraud and credit line are supposedly done, and a decision is taken. Post this there is a contractual obligation pertaining to payment and a product/ service being bought. So where can changes takes place in order to sort the issue of a traveller receiving one payment detail?

Interchange is the clearing and settlement mechanism that transfers data between the card processor and the issuing bank.  There is an opportunity for card schemes to help the industry, improving the situation at the back-end, says Gablehouse. The back-end requirements are where this single order ides is quite fragmented, she says.

Here the situation is expected to be better in case of alternative form of payments such as digital wallets.

The idea of having one generic merchant id

The scenario can evolve by working with card schemes and identifying means for the airline or merchant if they could authorize $1500 as a total and not as $1000and $500. They are being billed separately as we don’t have the standards to allow for the single authorization for two different merchants. In order to settle $1500 settle at one go, authorization needs to be a single, bundled amount, says Gablehouse.

Hypothetically, Gablehouse says a single generic merchant id could be used to obtain the authorization for the entire sale. This is not something that the card schemes and banks should consider as a means to facilitate the process. This would also require changes to the settlement to ensure that the individual merchant ids could be used for settlement. In the ideal scenario, there should be multiple acquirers which eventually see the settlement file containing all components of shopping when a card scheme processes the billing. This would in turn simplify our payment experience if we were to book more than an air ticket with multiples services from an airline.

Ai Editorial: Managing fraud associated with indirect sales – a challenge for airlines


 

Ai Editorial: Airlines need to refine their fraud management tactics as well as work closely with travel agencies to reduce chargeback levels. Ai’s Ritesh Gupta learns how

Managing credit card fraud is an ongoing process for airlines, and keeping a tab on fraudulent transactions coming in via travel agencies remains a critical issue.

In fact, airlines list fraud-related issues associated with third party channels as a major challenge till date.

As airlines put smarter tools in place to detect fraud, fraudsters also get smarter; they move from one channel to another until they find the “unprotected front”. 

“We already see airlines who can deny a transaction in their call centers if it comes from a customer who has already been rejected on their website,” says Celia Pereiro, Head of Travel Payments at Amadeus. “Airlines should extend this multi-channel approach to an omni-channel one, which includes a single repository for all travel data regardless of the channel.”

And negligence or being ignorant wouldn’t help at all.

“If airlines consider that, in view of IATA Resolution 890, payment fraud committed via a travel agent is not airlines’ concern (those airlines) may be missing the full impact of fraud,” says Pereiro.

She says regardless of who is liable for the cost of the chargeback, airlines, as the merchant of record, are still liable for processing, investigating and resolving the chargeback; moreover, the airline will never recover the bank fees incurred when they processed the payment in the first place.


For its part, Amadeus has developed a solution that will allow airlines to implement a fraud detection mechanism before authorization and ticketing issuance, saving both manual intervention and costs.

Points to consider

  • Contribution: First of all, airlines should look at the weight of indirect distribution in their overall channel mix. Secondly, they must analyze how big of an impact fraud is on this channel – this is often hard to track for airlines because the information they receive in a chargeback may not include reservation details, says Pereiro. Carriers should also consider the loss of revenue and costs as a result of fraud and the negative impact it may have on the relationship with travel agencies.
  • Communication: Fraudsters today take advantage of the lack of, or, delayed communication between travel agencies and airlines by making an innocent-looking booking with a travel agency and then calling the airline call centre to change the details of the booking to one which would have been detected by a fraud management system. Airlines and travel agencies should work together and ensure seamless communication to close loopholes such as these, recommends Pereiro.
  • Reaction time: In case there is a dubious development, the response time and the sort of action that is taken needs to be improved upon. “The lack of automation and the long cycle of a travel agency sale often make it difficult to react quickly,” points out Pereiro. In order to close that gap, airlines need to gear up for real-time visibility of all transactions processed via a payment platform. “This will allow airlines to have not only a single repository of payment and PNR details, but also enable them to easily take corrective actions on bookings, look at statistics and monitor performance,” says Pereiro.
  • Operational costs: It is a common practice that airlines cancel bookings done by travel agencies due to credit card fraud. The communication between airlines and travel agencies varies from one airline to another however, it usually involves manual intervention. When a booking is cancelled both the customer and travel agent will be able to see the booking as cancelled, says Pereiro. One needs to automate follow-up actions performed based on the fraud check results, helping reduce airlines’ operational costs. “If, after a manual review, the airline decides that the transaction is fraudulent, we automatically void the ticket and cancel the booking, enabling the airline to automate communication with the travel agencies,” shared Pereiro.
  • Checks on a booking: It is imperative to integrate a fraud check into the GDS booking flow with no impact on the agent’s booking flow. This means that airlines can stop fraud before the ticket has even been issued, reducing the manual effort associated with managing fraudulent bookings. “As we manage the booking, we can use data to contextualise the sale and easily identify good and bad customers at the time of booking,” says Pereiro. There is a fraud screening request before even requesting an authorisation. This is an essential step to save costs by preventing a ticket from being issued when payment is detected as fraudulent.

For bookings that require a further review, airlines can make a decision based on information and either accept or deny that booking. “If an airline decides to deny the booking and the ticket has already been issued, then we’re able to automatically void the ticket, therefore maximising effectiveness and reducing the manual workload,” says Pereiro.

The prevalent situation

Nowadays the earliest airlines can detect fraud is usually after the ticket has been issued, says Pereiro.  Today, airlines can have internal processes in place or rely on a third party to screen all bookings coming via the travel agency channel. All this, though, ends up being costly as it involves heavy manual intervention and clearing up to be done when a payment is detected as fraudulent. This is however the best case scenario, says Pereiro. 

Most commonly, fraud is detected at settlement time by the airline’s bank, which is then reported to the airline as a chargeback. Then the costs add on, making the ticket cost only one component of the total cost of a fraudulent sale.

The worst case scenario is when airlines take a binary approach to fraud controls; for example blocking transactions from entire countries or regions– rejecting valid transactions as a result. Assuming that the false positive rate is 5%, then even small airlines could be missing out on hundreds of thousands of dollars’ worth of revenue. To be able to realise these savings airlines should consider smarter anti-fraud solutions which uses the traveller data at their disposal to check for indicators that a transaction is fraudulent or not. For example, historical data which shows that a traveller has a history of making similar trips – even on different airlines – would add significantly to the accuracy of fraud checks.

So what happens when an alert surfaces that stops a ticket from being issued when payment is detected as fraudulent?

Pereiro explains: when a transaction is sent to be checked by a fraud management provider, the resulting cases can be one of the following:

  • Positive – this doesn’t look fraudulent
  • Maybe – this should be checked
  • Negative - this looks fraudulent

Fraud management needs to be business rules-driven, meaning that the responses provided will be determined by the score each transaction obtains based on the criteria selected. “In addition, we can help airlines to define their fraud strategy and set the balance between accepting and denying transactions,” shared Pereiro.

With the Amadeus product, in the case of a positive result the ticket is issued; in the case of maybe the ticket is put on hold and the PNR is placed in a queue for manual review, where a negative response triggers stopping the booking before the authorization process and there is no option to issue the ticket; and in the negative case the booking is automatically cancelled.

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Ai Editorial: BITCOIN – Beyond Imagination - a Terrifying Currency?



Ai Editorial from Jiri Marek, former Executive Sales & Marketing Director, LOT Polish Airlines

BITCOIN – Beyond Imagination - a Terrifying Currency?

This is my own definition of this growing phenomena of new age, describing feelings, principles, fears and opinions coming to the mind of people whenever they hear word BITCOIN It came to me through my experience of introduction BITCOIN as payment method into Aviation. How BITCOIN and AVIATION can get along with each other?

“Opposites attract” is the fundamental principle of nature, and more philosophically we can look to the east to Yin and Yang or to the west to light and dark side of “The Force”. Also in aviation we have contradictions.

On one hand airlines are highly regulated with very limited spot for frivolity, but on the other hand one of the core engines running aviation development since decades was look for the future and the out-of-box solutions. It seems that the opposites attract… but in this case not quite.

The same airlines, that do not want to loosen up on safety and security principles, are facing the new and liberated world of the internet. These two pieces are in fact very hard to match. When I shared for the first time this new idea of adopting BITCOIN as payment method within airline, it creates a feeling inside the organization like bringing “chaos” into “order”. In fact it was more of a fear. BITCOIN is somehow still perceived as the currency of the anonymous rebels, synonymous of the unregulated and wild deep internet world. 

Since airlines are extensively regulated mainly on safety and security issues, and they are using state of the art technology for flying, they became on the other hand kind of fossils in the merchandising and distribution of their content and product towards end consumer. In a result this is what we have: airlines would like to gain global reach and constantly complaining about regulators and authorities that they are bringing constrains and limit them to became truly global and on the other hand we have global borderless payment solution ready to use without any regulatory body or government behind it and no ownership, but somehow still steered clear of. Now is the time to look for the future.

I have no doubts, that the magnets will attract this time as well and it will happen sooner or later as The Mother nature always find a way through, constant search for balance, leading to evolution. Would you like to wait for this “evolution” or take rather first mover advantage and be part of “revolution”?

Ai Editorial: Understanding peculiar issues associated with emerging payment methods

Ai Editorial:  Bitcoin, Alipay, convenience store transactions etc. exemplify the diversity in payment methods. And such options call for management of atypical issues, too, says Ai’s Ritesh Gupta 

Any sort of improvisation in a payment strategy requires introspection on several counts, be it for evaluating payment complexity, impact on the user experience, ensuring security for that particular sales channel or ability to monitor the fraud chargeback activity.

And today change is inevitable considering the increasing popularity of specific payment options in different markets. Airlines have to adjust as for many it’s a cross-border business.

There are certain market nuances such as prevalence of local domestic payment methods that can drive payment strategy – for example, convenience store payment in some Asian countries. Also, unlike credit card, each of the payment options in Asia has its uniqueness, e.g. transaction limit, availability of refund, chargeback rights etc. It requires airlines to design and implement necessary payment interfaces and processing flows.

Overall, airlines need to look at peculiar issues as they embrace new form of payments. Here we assess a couple of aspects:

  • Cost analysis

An airline might be running operations smoothly in several markets, but a similar move may result in additional expenditure in a new one.

For instance, in case of China, it’s imperative for travel brands to offer options like Alipay and or let Chinese consumer pay via WeChat.

As per the feedback from specialists pertaining to Alipay, operating in China requires a separate integration cycle and payment acceptance service level than would typically be needed for other regions and markets.  “PSPs like Stripe and Braintree provide for a more seamless integration on the backend, however because of regulations in China and Alipay’s market size, it is easier for brands with interests in China to work directly with the payment platform,” shared a source. Importantly in order to integrate a PSP like Alipay, a company based in the U. S. may need dedicate resources and staff for processing and acceptance for the Chinese renminbi.

“While enabling Alipay payments is critical to gain visibility and drive transactions in China, for smaller hotel chains, airlines or OTAs this additional resourcing is a large undertaking that can put a strain on cash flow and carry higher requirements for security against chargebacks. Additionally as Alipay remits payments through SWIFT, OTAs and travel brands will have to plan around payout timetables - which vary from country to country- and the applicable fees,” shared a source. “Another thing travel brands should consider the user experience, as travellers are completing their travel booking or reservations. Several PSPs oftentimes redirect users away from the branded site or app to complete their transactions an experience that travel brands cannot control or manage, which can lead to confusion, or worse, booking abandonment.”

  • Infrastructure related issues

For airlines, the fact that the process can involve their legacy infrastructure, it only adds up to the work that’s needed to be done.  

“One of the key issues faced by airlines is heavy reliance on legacy infrastructure that prohibits them from adapting to the fast changing world of payments. If this is not addressed in a timely manner, airlines can risk becoming uncompetitive and non-relevant,” says Shreyansh Durgesh, Director of Sales and Business Development, Asia Pacific, Bitnet Technologies.

Delving deeper, Durgesh says, “Sometimes it is seen that airlines are unable to or take too long to launch new payment capabilities due to their backend system being too complex to work with new technologies. Lot of airlines have built their functionalities and respective business processes on top on a legacy mainframe application.”

“Most of the time these legacy infrastructure and their limitations determine how payment related processes or functionalities can be changed,” he says. For example, an airline’s DCS (departure control system) may follow certain rules to flag a risky booking based on fraud detection systems for further checks during check-in. But if the fraud detection and legacy platform are not compatible, it can lead to sub-optimal usage of such fraud detections services.

  • Fraud management

In addition to coping up with the challenge of system integration (each payment method works differently which means that each implementation can be costly and lengthy), another hurdle that comes with the new methods of payment is fraud as fraudsters always evolve to find ways of exploiting weak spots in payment processes and systems. So fraud management should be on top of the agenda for any airline integrating new payment methods.

There is also need to clarify certain points, too. For instance, bitcoin is like digital cash. So is there any way to recover or whom to approach when bitcoin is stolen?

Here it needs to be understood that bitcoin wallet private keys are the only proof of ownership of bitcoins. Once these keys are stolen it is impossible to reclaim ownership of bitcoin, says Durgesh.

“Bitcoin is decentralised protocol and not regulated, hence there is no central authority to turn to in case you lose your bitcoins. There have been number of bitcoin related compromises in past but they are not due to weakness in bitcoin protocol itself and rather due to because of weakness of security system employed or negligence of bitcoin service providers,” he says.

So it is important for consumers to carefully select their bitcoin service provider who has appropriate security system and policies to safeguard consumers’ bitcoins. There are specialists who keep bitcoin stored in secured, geographically separated cold storage as well as insure users against any losses, says Durgesh. Also, as the bitcoin ecosystem continues to grow we will see a lot more innovation in provision of wallet security services. 

Being nimble

As the payment ecosystem continues to evolve, airlines need to be nimble. Be it for gearing for EMV liability shift in the U. S. or capitalizing on the popularity of an offering like Alipay in China, there would be changes for merchants. It is of paramount importance to be aware of requisite resources and the level of expenditure required to set up a new method of payment. Plus issues associated with integration with legacy systems, back-end operational systems etc. as well as fraud management, too, need to be scrutinized.

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Delivering data-backed seamless payment experience

Ai Editorial: Airlines need to plan diligently for an omni-channel payments offering. Ritesh Gupta finds out what needs to be done, and how to reap rewards.  

The value of delivering an omni-channel payments solution is in the ability to deliver data-backed, personalized customer experiences across all sales channels.

This requires the ability to capture data across all payments channels through a single integration. With a single overview, it’s possible for airlines to reduce their internal workload, streamline processes, and gain valuable insights into cross-channel customer payment preferences. The ultimate result is the increase in revenues.

Here we explore how to craft an omni-channel payment experience: 

  • IT infrastructure:  There are airlines that are still using legacy systems that have been designed to handle credit card transactions only. Such infrastructure has limiting capabilities, and not designed to integrate with new technology. Importantly, it ends up being an investment decision. A mechanism is worked out taking into consideration all the sales channels and this layer deals with one or more payment service providers, and streamlines operations such as multi-acquiring switching, alternative forms of payment, reporting etc.

It is important for airlines to look at the entire payment chain, from gateway to risk, to acquiring, and identify areas in which they can prioritize improvements, says Sander Maertens, VP Travel, Adyen.

Airlines need to gear up for an integrated solution for the entire payment chain, as well as support alternative payment methods, and look for a single line of reporting and reconciliation. 

  • Single view across all channels: It is important for airlines to capture data across all payments channels through a single integration.  Identifying travellers across payment channels, and thereby paving the way for a faster check out regardless of location or device they are using, is a clear benefit of an omni-channel approach.
  • Making adjustments: Airlines need to adjust their operations, too. For instance, the settlement process of alternative payment methods can differ vastly. In case of SEPA Direct Debit, one of the preferred payment methods in Germany is asynchronous, meaning that there is no real time confirmation that the funds are guaranteed. As confirmation is given after several days, therefore this payment method should not be available with a short time to fly.
  • User experience: The payment ecosystem is responding to the expectations of customers by looking at new ways in which you can shorten processing times and improve the customer experience. But even though mobile is now a primary sales channel, there are times when the experience isn’t optimized. The shopper flow is often compromised at the payment stage by two key failures – a clunky look and feel, and multiple steps to complete the purchase.

By offering dynamic payment pages that automatically detect the screen size of the consumer, the device, airlines can ensure a more seamless payment experience. In addition, offering features such as one-click payment, where at the checkout stage shoppers are given the option to have their payment details securely stored, will also optimize the mobile experience. With the rapid evolution of the mobile payment landscape, it is often key to work together with a payment to remain on top with the latest developments.

Benefits

  • Combating fraud: In an omni-channel payment environment, data is again the key to minimizing fraud. By gathering data across channels, it is possible to determine a transaction’s fraud score by looking at specific data points such as device type, time to flight, ticket value and type of journey. By designing intelligent dynamic screening based on real-time analysis of the most comprehensive range of shoppers’ data, airlines can take a customized approach based on their specific requirements. This way it is possible to effectively reduce chargeback rates and minimize “false positives”, that is to say genuine customers that are declined.
  • 3D Secure: Traditionally, online merchants have adopted a binary view to 3D Secure; implement it across all transactions, or don’t implement it at all. However, both of these approaches have problems. If you apply 3D Secure to all transactions, conversion will suffer, and if you don’t apply it at all, fraud will still be a factor. But there is a third possibility – selectively applying 3D Secure only to high-risk transactions, based on data customized to the airline. The way to do this is to dynamically assess and rank a transaction’s risk score on a scale from low to high, and then trigger 3D Secure only for the high-risk transactions. This means airlines can avoid routing genuine customers through 3D Secure, ensure a smoother payment flow, and minimize the potential conversion impact. By making 3D Secure a dynamic part of the payment flow, it becomes an asset rather than a conversion killer.
  • Understanding cross-channel customer payment preferences: Once the infrastructure is in place, real-time API’s can deliver information about the payment preferences and behaviour. So be it for simplifying payment page, tailored options (for example, once its ascertained that the card user is a German, he or she could be offered a cheaper payment option suited for that nation), stored card details or optimizing for mobile, all can benefit a travel e-commerce brand.

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Ai Editorial: Gearing up for AFP's in Asia

Accepting AFPs in Asia – it’s about handling intricate issues

Alternative form of payments (AFPs) is flourishing in Asia. Each has its own unique application and settlement process, language/ currency support, and is subject to domestic rules and regulations. Ai’s Ritesh Gupta reports.

It can be quite demanding for any travel e-commerce entity, be it for a mature business or a start-up, to finalize an apt payment strategy in the Asia Pacific region.

AFPs have gained traction, and they generally tend to address a domestic economy. It’s a fragmented space, and airlines need to understand intricacies of each market.

In China, around 45% of online transactions are made using e-wallets, such as options offered by Alipay, China Unionpay and TenPay, and other emerging options include WeChat payment. 

A company needs to be spot on otherwise the conversion rate can take a dip. For instance, Uber, the mobile app-based transportation network, has worked out an effective zero-click payment mechanism. Users of the app simply register their card as card-on-file, request their drive, and their card is charged at the end of the ride. After registering, the payment will subsequently be made when you use the app, and there is no need for the customer to go through a payment process. But recently, Uber decided to introduce cash option to make it service more accessible in India. So customers can pay via prepaid wallet, debit/credit card or cash.

There are various factors airlines and travel e-commerce businesses need to consider while assessing which alternative form of payments to go for across the Asia Pacific region. A prime reason behind this is the variety of payment options that are available, which are as diverse as the region itself.

Low credit card penetration

Talking of the Asia Pacific region, Bangkok-based Mario Peng, CFO at hotel mobile booking app HotelQuickly says a major challenge for accepting payments from customers is the low credit card penetration rate and acquiring bank charging cross border fees to customers. To reduce credit card acquiring fees, remove cross border fees charged to customers and to offer alternative payment solutions to reach non-credit card holders, merchants are required to set up local legal entities and/ or work with different payment service providers for markets in Asia.  

“It is quick and easy to setup global credit card acquiring. But there are many markets where credit card acceptance is relatively lower than say Hong Kong and Singapore,” says Peng. “So for markets like Indonesia, Vietnam, Philippines, Thailand etc. the team is looking at alternate payment methods – and for the same it evaluates both commercial and technical aspects of tying up with a payment gateway.” A local payment gateway fulfils certain legal requirements, and then airlines or OTAs assess the ability to facilitate payments for preferred payment channels. For instance, in Indonesia, as Peng told us the company is evaluating two payment service providers – while one can facilitate ATM transfer, convenience store (these are semi-digital payments - a consumer takes a code or a QR Code associated with a booking and pays), and online banking, the other isn’t able to offer online banking as an option.

Hong Kong-based Joseph Chan, CEO, AsiaPay says various non-credit card payment options have different rule sets. For example:

  • Maximum payment limit cap;
  • Mostly does not support pre-authorisation, void, partial capture and reversal;
  • Refund could be offered online but only possible offline in some payment options;
  • Settlement cut-off

Chan says an ePayment partner in Asia for airline can readily address the following challenges that airlines may face as they plan for added local payment options:

  • Some local payment options in Asia may require the airline to have local registered entity, especially if the settlement goes directly to airline;
  • Many different payment options are not readily designed for multiple channels and mobile response. Extra cross-channel payment interface design and development may be required if airline goes directly with local payment platform;
  • Unlike credit card, each of the payment options in Asia has its uniqueness, e.g. transaction limit, availability of refund, no pre-authorization, chargeback rights. It will require airlines’ necessary effort to design and implement necessary payment interfaces and processing flows.
  • Considerable effort may be required by airline to consolidate payment transaction especially for easier reconciliation and reportings of sales and settlements across payment options, and not to mention for CRM, payment analysis reference. 
  • Apart from credit card, some of the Asian countries are still in cash market so local alternative payment such as netbanking, OTC, debit card, ATM payment as well as cash counters etc are the major payment methods practice in these countries like Thailand, Philippines, Indonesia, Vietnam etc.

Penetration of AFP

As for AFP, there isn’t any consistency across the market.

Unlike most of the other countries in the Asia Pacific region, options for AFP are yet to take off in a big way in Australia. Carriers in Australia have listed POLi, an online real time debit payment system, as an option. It allows buyers to use their Internet banking to pay for their online transactions. POLi is currently available within Australia and New Zealand. Among other carriers in the region, Air Asia added POLi as a fee free payment option on their website few months ago.

“There is no credit card fee, and the system results in instant booking. Of course, a major lure that works in favour of POLi is that it results in consumers saving significant amounts of money. So say, for a family of four, booking via POLi would end up in A$30 savings,” says a senior airline executive. As for facilitating one-click payment via mobile devices, the executive says the market is still “2-3” years far off. “There are certain legislative issues, too, that can hamper the growth of mobile payments. For instance, it isn’t allowed to store CVV in Australia. The privacy laws are quite strict at this juncture. So this can impede the implementation and the take-up for services that are burgeoning in other markets.” 

Gurgaon, India-based Jibby Jacob Kollanoor, director, South Asia, UATP, says consumers want to be able to pay with the local AFPs they are used to and comfortable with. “One of the most popular AFPs in this region is Alipay, an e-wallet in China that is also capturing a large percentage of the mobile wallet space,” he says.

Preparing for bitcoin

Airlines also need to gear up for emerging digital currencies like bitcoin. To initiate a bitcoin transaction, a consumer must have a bitcoin wallet. “The easiest way to get one is by choosing one of web based wallet services providers such as Coinbase, Blockchain.info etc. Once the wallet setup is complete consumers must fund their wallets with bitcoins purchased from either local bitcoin exchanges or by other means. These bitcoins can then be used to purchase tickets at airline websites,” says Shreyansh Durgesh, director of sales and business development, Asia Pacific, Bitnet Technologies.

According to experts, bitcoin simplifies airline payment by eliminating any risks and unnecessary costs associated with payments. But there is still lot of apprehension among airlines regarding bitcoin due to its price volatility, regulatory concerns etc.

For its part, Bitnet has simplified bitcoin acceptance for airline merchants.

“With Bitnet, an airline will not touch, store or process bitcoin. Airline will be able to price their tickets in local currencies. We will accept bitcoin payment on their behalf and pay the airline in local currency of their choosing,” shared Durgesh, who added that Bitnet has simplified airline bitcoin payments with its UATP partnership.

Finalizing plans for AFP

Kollanoor says a lot of factors need to be considered before finalizing which AFPs to go for:

  1. Know the local requirements, such as whether they are required to partner with a local entity in order to start connecting with local consumers.
  2. Understand what types of AFPs the consumers in that market are used to – do they prefer bank transfers, e-wallets, bitcoin, local credit card, etc.
  3. One of the most important to consider is to understand the complexities of integrating with a particular AFP; the goal is to expand payment acceptance and to get to market as quickly as possible to generate new revenue.   

Each payment option has its own unique application and settlement process, language and currency support, and is subject to domestic rules and regulations. Kollanoor says airlines can use their existing UATP infrastructure and reporting solutions to quickly bring AFPs to market. 

Airlines need to understand the limitations of their systems. It needs to be assessed whether airline should build a direct connection from scratch that constantly needs to be maintained, or rather they can utilize their existing acceptance platform and back-office processes to enable the new payment methods. Also, reconciliation remains a big issue for the airlines; it can be rather labor intensive and be a long, tedious process if done manually.  There is a need to gear up for simplified daily reconciliation.    

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