Improving upon operating margin via payment orchestration

5^th October, 2020

Airlines can’t afford to let a booking slip by. E-commerce and payment technology specialists acknowledge that the way paying for essential daily needs and eventually other categories has shaped up during the pandemic, it is imperative for airlines to look at several aspects including their payment infrastructure, payment options, cost reduction, UX and conversion etc.   

“The challenge for airlines, apart from the immediate cash crunch and stop in travel demand, is re-tooling their digital payment systems to streamline direct-channel bookings and reduce cost per transaction,” Stephane Druet, SVP Product and Marketing at CellPoint Digital told Ai’s Ritesh Gupta in an interview. He added in the recovery phase – whenever we get to it – the question will be, “how can we do a lot more with less?”

Significance of payment orchestration

Payment orchestration is a strategic move to give airlines competitive advantage over the long run, but it will also be a great tactical move to support immediate recovery. If on one hand their focus is on intelligent routing that will dynamically optimise the routing of each transaction via such a network, on the other the plan is to work on an omni-channel experience and the ease of one-click payments, along with localized options in all the markets.

Druet said payment orchestration allows a merchant to quickly add the payment methods customers prefer in each market during the checkout process, reduce cart abandonment and maximize conversion. On the processing side, payment orchestration reduces the cost per payment transaction by dynamically routing payments to local acquirers to reduce cross-border traffic (and fees).

“Just a few percentage points improvement on an airline's conversion rate, authorisation rate, chargeback win-rate will make a huge impact on their operating margin. Payment orchestration helps them achieve that, so that's what they should focus on,” mentioned Druet.

A modern payment ecosystem that is governed by a payment orchestration platform simplifies and modernizes legacy payment systems and facilitates a truly omni-channel approach to payments. Airlines need to ensure this capability shouldn’t prove to be a costly and time-consuming initiative.  

“By the same token, it's not feasible for airlines to build connections with all the players in the payment space. Integrating individually with acquirers, payment processers, fraud partners and other providers is far too complex to manage effectively. But integrating with a single payment orchestration platform that can handle all aspects of the payment processes is simple, and can allow airlines to reduce cost and boost efficiency all while retaining the flexibility to shift when the market dictate,” said Druet.

He added, “Many airlines outsource their payment systems to a PSP and their PSS provider, under the assumption that a single vendor relationship will create simplicity. But these gateways tend to divert transactions to their own acquiring business, rather than to other acquirers who may offer a better transaction and authorization rate for the airline’s payment – and making modifications can be cumbersome.  By eliminating their reliance on third-party payment providers, payment orchestration allows airlines to set the direction of their payment strategy and move nimbly to achieve it.”

“We believe payment orchestration really has the potential to be a silver bullet, at least in terms of transaction routing, authorisation rates and the ability to roll out new payment methods quickly and seamlessly,” he said.  

In short, payment orchestration allows airlines to unify all components of a transaction under a single control layer. For cross-border merchants like airlines, this means integrating the right mix of regional and global payment partners (PSPs, acquiring banks) to optimize acceptance rates and minimize cost. A good payment orchestration platform will also automate back-end processes like settlement and reconciliation and incorporate fraud rules and regulatory compliance, all of which reduce chargebacks and fraud.

Payment orchestration synchronizes the flow of data and currency across channels and in concert with existing systems like reservation systems or loyalty programs and harmonizes any differences in format. And importantly, it facilitates the rapid deployment of new payment methods to meet customer expectations and preferences in various markets.

Getting ready for new payment methods

Supporting new payment methods is already on the priority list of airlines.

Read more: #ATPS workshop - COVID-19 accelerates adoption of new payment methods

Shoppers have embraced contactless or touch-free transactions. The coronavirus has accelerated a trend that was already in progress, acknowledged Druet.

“The appetite for contactless payments is growing, so airlines can expect to see an increased demand for mobile payments such as Apple Pay and Google Pay. As consumers regain the confidence to travel, they’ll expect airlines to support their payment needs - and travellers in different markets will have different preferences. Meeting those preferences in each region allows airlines to boost conversions and reduce abandoned transactions due to payment friction, or lack of available payment method,” he said.    

A payment orchestration platform significantly reduces the time to market for rolling out new payment methods, as integrating a new Alternative Method of Payment (AMOP) happens within the platform itself, not across individual systems. This allows airlines to pivot to meet travellers’ different payment preferences in different markets, and to do so without waiting in queue for a third-party provider to build out the necessary integration, explained Druet.

Airlines have to gear up for a mechanism that can support payment methods that customers value and prefer. In the current environment, that means contactless payments and digital wallets like Apple Pay. In the future, that may mean something else.

“Regardless of the COVID-19 crisis, the payments ecosystem continues to diversify, so it's not about supporting one method of payment over another. It’s about having the flexibility to deploy new payment methods when customers demand them, and to be able to do so at minimal cost and maximum speed. Consumers will pay in the manner which makes them feel most secure and confident about their transaction; it's up to airlines to meet them at that point. A payment orchestration platform helps them do that,” said Druet.

#ATPS Pre-event workshop on payment orchestration for airlines: Why, what and how?

Tuesday October 13, 2020, 6PM (GMT+8), 12:00 PM CET, 6:00 AM EST

http://www.airlineinformation.org/upcoming-events2/607-atps-virtual-conference-2020.html