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In the aviation industry, driving ancillary revenue is one of the key pillars of growth, particularly post-pandemic. As the industry rebounds at pace, we are beginning to see new payment trends emerge on board:
Evolving trends
As the industry rebounds at pace, we are beginning to see developing trends emerge on board:
Going cashless – Accelerating a trend that many airlines had adopted some years before the pandemic, cash became less used by passengers who had started using contactless card payments instead. Early in the pandemic when advice was to reduce physical touchpoints, more airlines (e.g., United, EasyJet) adopted a fully cashless approach to taking payment onboard
Payment fraud – IATA estimates that payment fraud costs the industry around $858 million annually, with the impact of card payment fraud risk varying from airline to airline and even from route to route. They also suggest that the onboard POS offline limitations are a contributing factor to overall fraud losses in the industryOne of Beyond’s partners has gone as far as stating that on some routes, they are seeing a fraud risk associated with up 20% of all transactions.
Adaptation of onboard offering – While retaining, and increasingly expanding, food and beverage sales, many airlines moved away from traditional onboard sales methods. With many citing payments as a key challenge. Some, such as KLM, removed retailing altogether.
Stricter payment security from card issuers – To combat card payment fraud two-factor authorisation is evolving as a necessity when taking a card payment.
Connectivity on board – many providers are offering air-to-ground connectivity to airlines and as these are adopted it will be possible to :
Get online authorisation for payment
Two Factor Authentication with the passenger
Sending transaction data to the payment provider in near real-time
Expand retail offerings
Currently, Low-Cost Carriers are leading the way in evolving how payment is taken on board an aircraft yet lagging when adopting inflight connectivity. Onboard connectivity is yet to become a fixture of many low-cost airlines outside of the North American market – with a recent customer sentiment study carried out by Beyond advising that a reliable onboard connection is fast becoming a key driver in customer satisfaction.
These emerging trends represent an amazing opportunity for airlines, and onboard caterers, to take a fresh look at how payments are taken on board, as well as how payment fraud can be reduced to regain some of the losses caused by the pandemic which eroded 5 years of positive ancillary growth
Challenges
When looking at a challenge like tackling payment fraud, it is often better to try and improve 100 things by 1% than looking for that one big 100% improvement. Working with our client we have introduced card thresholds, blacklists, and synchronising transaction data between flights rather than at the end of a shift to improve the speed to get the payment to the payment provider. As air-to-ground connectivity becomes more widespread there are even greater opportunities to combat payment fraud.
When a Product Owner switches from web-based development to working on mobile apps the first thing they must get their head around is connectivity, as it is often no longer a given. Despite advancements in onboard connectivity, and the growing array of satellite-connected technologies, loss of connection is still a very real issue. Therefore, it is crucial to be 100% confident in an offline payment solution before approaching online payments or two-factor authentication.
Approach
Offline
At one level offline payments are straightforward, the transaction data is captured, the plane lands, the crew shift comes to an end and the last-mile provider takes the devices, plugs them in, connects them to a network and syncs the data. The back-office systems take this and pass it over to a payment provider to take payment.
However, there is an issue with this approach. By the time payment from the first service is passed to the payment provider it could be hours or even days later. The payment will appear out of sequence and may be rejected.
That is why Beyond has worked with their client to upload payment data between services, whenever an airport has sufficient connectivity. To optimise this process, we have worked to reduce the size of the file that needs to be transferred so it can work over 3G connections and above.
Online
When there is connectivity on board the aircraft, taking payment is not actually about taking payment. It is about getting authorisation from the payment provider that payment can be taken. The complexity comes when there is any disruption to the connectivity – when an online payment becomes an offline payment because the connection has been lost. Handling that is key to a smooth crew and passenger experience.
Complexities
With online payment comes two-factor authentication, just because there is an internet connection does not mean that a text message with an authorisation code will get through to the passenger’s phone. Therefore, it is important to consider other forms of secondary authorisation acceptable to a card issuer.
Beyond worked with their client on a solution for an airline based in the USA where one store had multiple merchants of record, meaning that potentially more than one transaction could occur from one shopping cart. We enabled a POS application working offline to take as many payments as needed, but also worked with the client to ensure that such a poor user experience was the exception and that multiple merchants were handled gracefully for the crew and the passenger.
Summary
Onboard connectivity was the hottest topic at this year’s AIX conference in Hamburg, but when taking payments, it is important to build from a solid offline payment foundation. If you would like to know more about how Beyond can work with your organisation to solve problems like these, please get in touch.