Direct debit for airline tickets demonstrated live in pilot transactions
A new digital direct client to supplier payment system for airline tickets with benefits for both passengers and airlines was successfully demonstrated in a live test environment in the United Kingdom.
On Tuesday this week, the International Air Transport Association (IATA) announced the successful completion of the first “IATA Pay” ticket purchase transaction conducted in partnership with ipagoo, a UK-based fintech company.
The association said IATA Pay is an industry-supported initiative to develop a new payment option for consumers when purchasing a ticket directly from an airline website. It is made possible by the European Commission’s second Payment Services Directive (PSD2), and the UK’s Open Banking regulation.
These regulations encourage use of so-called direct debit transactions in which payments are made from the customer’s bank account directly into the bank account of the merchant. This method offers an extremely high level of security to both user and recipient and can be instantaneous.
“IATA’s role is to develop an industry solution enabling airlines to make this payment option available on their websites. The live test conducted with ipagoo was done under the UK’s Open Banking framework with IATA Pay pilot airlines, including Cathay Pacific Airways, Scandinavian Airlines and Emirates,” according to the association which represents around 290 airlines comprising 82% of the world’s travel market.
For airlines, the advantages of IATA Pay are cheaper payment option compared to other alternatives, it is highly secure, and the transaction is immediate leading to a faster cashflow with instant or near-instant transfers.
The association said a simpler yet secure digital payment system on airline’s websites will result in fewer lost sales due to glitches and customer fatigue.
Passengers also benefit from the new payment system in having access to a new, simpler, highly secure, immediate purchase platform.
“Today’s consumers, and especially millennials, have expectations of multiple payment options including mobile and peer-to-peer. IATA Pay responds to these expectations. At the same time, airlines are trying to manage significant card payment costs — US$8 billion per year and rising. 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,” said Aleksander Popovich, IATA’s Senior Vice President of Financial and Distribution Services.
Carlos Sanchez, the Chief Executive of ipagoo said: “We are delighted to have completed the first Open Banking live transaction for the airline industry, helping IATA and its member airlines to achieve their goals of operational and financial efficiency. ipagoo’s technology provides a secure, multi-country banking service for IATA.”
IATA is also working with Deutsche Bank on a prototype for Europe starting with the German market. The first test runs will be done early this year. Once the concept has been validated, it will be expanded to other regions.