Airlines have long been reliant on credit cards as the primary payment type they accept online. However, as carriers' margins are increasingly squeezed, the industry is becoming more aware of the importance of enabling alternative payment methods to gain competitive advantage - and new research shows mobile is top of mind.
The research from WorldPay indicates that 88% of airlines now believe alternative payment methods are critical for revenue growth. The key benefit, cited by 89% of airlines, is to meet the demand of customers by offering them a choice. However, alternative payment methods can also reduce costs and increase revenue, according to 64% and 59% of respondents respectively. The global nature of the airline industry is flagged up by 23% who say that fitting in with cross-border expansion plans is a reason they offer alternative payments, while 41% cite keeping up with competitors.
One of the most interesting findings of the research is the rise and rise of mobile payments (payments for transactions made on a mobile device). Mobile payments are now accepted by one quarter (25%) of airlines - this is up from 10% in 2012.
More than half (57%) of respondents say that mobile (along with credit cards, also at 57%) is the method with the greatest potential to drive revenue over the next two years, followed by e-wallets (48%) and debit cards (43%).
Airlines are now focused on improving and innovating their mobile payment offering, meaning customers will see significant developments in the way they purchase tickets and services in the near future.
We're already seeing advances in this area - Malaysia Airlines, for example, has a mobile app which allows customers to book travel on their smartphones using the app and pay for tickets using their PayPal accounts.
And while Emirates customers currently need to book and pay via the mobile version of the airline's website, not via an app, the airline has plans to accept all payment types on all devices in the near future . In fact, a third (32%) of airlines surveyed say they plan to accept mobile payments within the next two years.
Around the world
Airlines need to consider where the demand for using alternative payment methods is coming from, and focus their efforts accordingly. Traditional payment mechanisms continue to be popular in more mature markets, but other regions - such as Germany and the BRICS nations - are seeing especially strong growth in alternative payments, creating demand for a more diverse payment portfolio.
When looking to implement an alternative payment strategy, airlines should consider specific factors such as payment method preference, device penetration and country telecommunication infrastructure.
A key challenge will be integrating new types of mobile payment systems into airlines' existing infrastructure. 73% of airlines say that integrating additional methods of payments into their current systems without external assistance is a key issue. The cost of implementation (39%), fraud risk (32%) and lack of knowledge/ resources (32%) are secondary barriers.
The focus now for alternative payment providers is to not only keep up but keep ahead of this fast-developing landscape and continue to provide ground-breaking innovations to help airlines better serve their customers - wherever in the world they are.