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Alternative Payment and Distribution Landscape:

Airlines and Alternative Payments - The Facts





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About this
whitepaper
WorldPay, a global leader in airline
payments and settlements, has
created the Alternative Payment
and Distribution Landscape: Airlines
and Alternatives The Facts
whitepaper exploring the results of
a research study of 56 global airline
carriers looking at the motivations,
trends and future plans for offering
alternative payments.
This whitepaper comes after part one in this whitepaper
series that looked at the developments in alternative
payment solutions specifc to the airline industry,
and the challenges currently facing carriers.
A third whitepaper will bring together the results of
research on 42 airline carriers identifying their current
challenges and trends facing carriers in developing
distribution channels.
Methodology
WorldPay carried out a global online survey among
industry professionals from 56 airline carriers from
low cost to traditional. The sample consisted of
contacts held by Airline Information, an established
leader in commercial aviation conferences. The research
was conducted between May and July of 2013.



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WorldPay offers airlines a
full payment service and risk
management solution across all
global distribution channels.
Providing payment coverage in 181 countries,
WorldPay helps airlines connect globally, supporting
the widest choice of payment types and currencies
achieved from a single integration.
WorldPay manages payments for 70 airlines globally
including some of the worlds largest aviation brands.
Mike Parkinson, VP Airlines, WorldPay
Mike Parkinson is the Vice President of the Airline
Sector at WorldPay. Mike joined WorldPay in 2000,
and has held various senior positions including Head
of Partnerships, and Head of Global Corporate Sales.
More recently, Mike has been responsible for looking
after the Airline Sector, where WorldPay has an
established portfolio of payment processing,
fraud and settlement services.
About WorldPay



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In part one of this whitepaper series,
we explored the developments in
alternative payment solutions specic
to the airline industry, which has a
number of unique characteristics.
By the very nature of what airlines do, the sector
must operate on a global scale, whilst considering
local factors including the prioritisation of distribution
channels. From the availability of smartphones and
hence the access to mobile payment methods to
local infrastructure considerations, each region
has a number of unique challenges.
Globally payment preferences vary hugely ranging
from real-time bank transfers to offine credit transfers;
from direct debits and e-wallet payments to paper-
based systems and payments by mobile applications.
It is estimated there are more than 230 methods of
payment available around the world. Yet the airline
industry still heavily relies upon credit cards as the
primary payment method.
One of the main factors for this is the complexity
and cost associated with implementing alternative
forms of payment. As a result, airlines need to work
with a provider of payment services that understands
those challenges and is prepared to design specifc
solutions for this industry with reliable service levels.
With a fast-moving landscape, airlines are increasingly
looking to implement locally preferred systems of
payment, which in turn will drive the development of
solutions. In order to be truly global, airlines need to
respond to local requirements to be able to maximise
their revenue potential and to serve their customers
and win new customers.
Introduction



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Contents
About this whitepaper 01
About WorldPay 03
Introduction 05
The alternative payment landscape now 09
Drivers for growth 10
Motivations for offering different payment types 13
Optimising revenue 15
Benets of offering alternative payments 16
The challenges of offering alternative payments 18
The future 21
Conclusion 23



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Credit cards, charge cards, debit
cards and air miles/loyalty points
remain the top payment methods
accepted in the airline industry.
However, a shift has taken place since last year.
In 2012 WorldPay conducted research of 51 airlines
to create the Perfect Passenger Payments report. In
comparison to the research in 2013 traditional payment
methods have slipped, with alternative methods gaining
ground. Whilst the acceptance of credit cards remains
the primary payment method, the use of credit cards
declined by 4% between 2012 and 2013.
Debit cards also lost some ground, with 64% now
accepting them as a form of payment compared to
67% last year. Offine bank transfer usage also
appears to be on the decline: last year, 25% of
respondents accepted them; this year thats down
to 8%. Direct debits and cash vouchers declined, too.
So what gained ground this year? Mobile made
a signifcant leap and is up 150%, with 25% of
respondents this year saying they accepted mobile
payments, an increase from just 10% last year.
E-wallet payments also gained acceptance: up from
33% last year to 38% this year. Prepaid cards were
also accepted by more respondents this year
13% now, up from 8% in 2012.
Air miles and loyalty points grew in popularity: this
year 54% of respondents said they accept them,
up from 45% last year.
The alternative payment
landscape now
Air miles / loyalty points / FFP
Alternative payment method acceptance:
2012 45%
33%
10%
54%
38%
25%
2013
E-wallets
2012
2013
Mobile payment
2012
2013
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Airlines need to consider where the
demand for using alternative payment
methods is coming from, and focus
their efforts accordingly. There are a
number of key markets which require
an alternative payment strategy.

Germany, with its well-developed e-commerce system in
place, is a global leader in alternative payment adoption
with alternatives making up 66% of a total e-commerce
value of 45 billion. 14% of respondents say this
market is driving demand for alternative payment
method implementation.
China is also driving demand for alternative payments
8% of respondents report that this is the country driving
greatest demand.
With a population of 1.35 billion and a growing middle
class that is increasingly accustomed to foreign travel,
the Chinese are fast becoming the worlds biggest
spenders on international tourism. The Netherlands
and the UK come next, forming the largest pockets
of demand for 6% of respondents.
Perhaps unexpectedly, Russia, despite having a varied
landscape when it comes to payment methods, was
cited by just 3% of respondents as driving the demand
to provide alternatives to credit and debit card, although
just 1% of respondents said Russia was their largest
market.
Traditional payment mechanisms continue to be popular
in more mature markets, but other regions - such as the
BRICS nations - are seeing strong growth in alternative
payments creating demand for a more diverse payment
portfolio. Airlines need to consider specifc factors such
as payment method preference, device penetration and
country telecommunication infrastructure when looking
to implement an alternative payment strategy.
Drivers for growth
Germany
14%
China
8%
Netherlands
6%
UK
6%
Brazil
5%
Holland
5%
India
5%
Mexico
3%
Russia
3%
Argentina
2%
Bahrain
2%
Canada
2%
Finland
2%
France
2%
Hong Kong
2%
Italy
2%
Phillippines
2%
Singapore
2%
Spain
2%
Countries driving demand for
alternative payment methods



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6
1
%
What are the reasons for using
alternative payment methods?
The key reason cited is to meet
the demand of customers by offering
them a choice: 89% of respondents
said this was the most important
reason. However, alternative payment
methods can also reduce costs and
thus increase revenue, according
to 64% and 59% of respondents
respectively.
The global nature of airlines is fagged up by 23%
who said that ftting in with cross-border expansion
plans was a reason they were offering alternative
payments, while 41% cited keeping up with competitors.
Importantly, the acceptance of alternative payment
methods is also a key differentiator between airlines,
say 61%.
Motivations for offering
different payment types
To ft in with cross-border expansion plans
23%
To keep up with competitors /other airlines
41%
To increase revenue
59%
To reduce costs
64%
To meet customer demand / ofer choice
89%
61% agree that
the acceptance of
alternative payment
methods are a major
differentiator between
airlines
Motivations for offering alternative payment methods



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A key theme that emerges from the
survey is the growth in mobile usage
and the potential it offers airlines.
57% said that mobile is the method
that has the greatest potential to
drive revenue over the next two years.
In second place, e-wallets are seen as having the
potential to drive revenues by 48% of respondents,
with the debit card in third place, cited by 43%.
Interestingly, 20% see frequent fyer points as a
driver of revenue growth, coming behind charge
cards (30%) and online bank transfers (36%).
Prepaid cards have yet to take off: just 13% said
they were likely to drive revenues, while direct debits,
cash vouchers and offine bank transfers occupied
the bottom three slots.
It is clear with the growing trend of direct sales for
carriers that managing direct customer interaction
and payments together will become a priority in the
future: 32% of respondents said they plan to accept
mobile payments in the next two years.
Optimising revenue
Frequent fyer points
20%
Charge card
30%
Prepaid card
13%
Bank transfer online
36%
Debit card
43%
E-wallet
48%
Mobile payment
57%
Credit card
57%
The payment methods that have the
greatest potential to drive airline revenue
in the next two years
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Airlines are very aware that a
choice of payment methods can
help drive business. Not only do
they acknowledge that alternative
payment methods can help them
reach new customers (63%), they
also point to lower processing fees
(61%) and a lower fraud rate (50%).
Additionally, a wide choice
of payment methods can help
airlines differentiate themselves
to potential customers and also
help drive customer loyalty, said
39% and 38% respectively.
A key challenge for airlines is the abandonment
of bookings during the purchasing process due
to customers not being able to use their preferred
payment method, or because their card is declined.
Not surprisingly, 34% of airlines said reducing booking
abandonment is a beneft of offering alternative methods
of payment.
Other benefts include a higher conversion rate,
according to 21% of the respondents, and improved
process automation (20%) as well as a higher
transaction value (11%).
Winning and pleasing customers is a key motivator for
airlines: when asked what reasons they give for offering
alternative methods of payment, a big majority 89%
said they would do so to meet customer demand.
Reducing costs for the carriers is also important, with
more than half (64%) citing that as a reason.
Given the benefts to carriers of offering a range of
payment choices, it is unsurprising to fnd that many
pass on those benefts to their customers in the form
of incentives: 39% of carriers who responded to the
survey said they use incentives, which is signifcantly
up from last year, when only 22% offered incentives.
Of those incentives, 86% of respondents offer discounts
to customers thats up signifcantly from 2012, when
only 55% said they offered discounts.
Benets of offering
alternative payments
6
1
%
6
3
%
50%
Ability to
reach new
customer
segments
Competitive
differentiation
Higher
conversions
Lower
payment
processing
fees
Customer
loyalty
Improves
process
automation
Lower fraud
rates
Lower
shopping cart
abandonment
Increase in
average order
value
3
9
%
21% 20%
1
1
%
3
8
%
3
4
%
Benets of offering alternative payment methods
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The survey also highlights that
alternative payments raise
challenges for airlines too.
One of the key issues of adding further methods
of payment is integrating those into current systems:
73% of airlines cited this as a challenge. The cost
of implementation (39%), fraud risk (32%) and lack
of knowledge/ resources (32%) are secondary barriers.
Despite these issues, gaining internal consensus
to offer a choice of alternative payments is only seen
as a challenge by 7% of those surveyed. This perhaps
indicates that for most airlines the upsides of creating
an optimal payment mix far outweigh the challenges
of implementation. However, further education is
still needed with 18% of respondents saying that
the benefts of offering different payment methods
are unclear.
With mobile payments set to take such a central role,
another issue for airlines is security and the
risk of fraud across existing and new channels.
The challenges of offering
alternative payments
Lack of integration
with current systems
and processes
Selling in to the
business internally
Fraud risk Cost of
implementation
Lack of knowledge /
resources
73% 7% 32% 39% 32%
The challenges of offering
alternative payment methods



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In the future, airlines have a dened
strategy for the types of payment
methods they plan to offer.
A third (32%) of those surveyed said they plan to
accept mobile payments within the next two years,
whilst 29% are planning to offer e-wallets and 25%
said they plan to accept prepaid cards as a form of
payment. Only 11% plan to offer Air miles or loyalty
points and 9% cash vouchers.
E-wallets and mobile are the primary payment
methods of choice under consideration and
furthermore, we are starting to see some carriers
working on their own methods of payment.
The future
32%
Plan to accept mobile
payments within two years
Mobile payment
32%
E-wallet
29%
Bank transfer online
29%
Prepaid card
25%
Debit card
20%
Direct debit
18%
Bank transfer ofine
14%
Air miles / loyalty points
11%
Cash voucher
9%
Charge card
7%
Planned payment types in the next 2 years
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Customer demand and offering choice are the two
biggest drivers for offering alternative payment methods.
While customers in more traditional markets are still
happy to use credit cards, emerging economies are
driving the need for a more diverse payment portfolio,
in particular e-wallets and mobile.
Airlines recognise that this will be a major driver of
revenue but also that it offers a commercial differentiator.
As carriers margins are increasingly squeezed, looking
for new ways to drive revenue is imperative. This is why
airlines are also looking at developing their own payment
methods.
Mobile is clearly an area for growth and again
consumer appetite is playing a key role here. Airlines
are already aware of both the need to develop services
and solutions and the potential revenue opportunities
if they do so, which in turn spurs payment providers
to respond with specifc innovations.
Offering the option to pay through mobile phones also
means airlines can reach and satisfy their customers
directly, but as with all the developing payment and
services methods available, the main challenge can be
integrating new systems into their existing infrastructure.
Alternative payment providers need to adapt to mobile
frst so that they can better serve the industry.
Conclusion



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