1、Travel Payments Guide 2019Well take your payments anywhere you want.Foreword from Amadeus2019 TrendsMarkets OverviewPayments GlossaryMethodologyTravel PaymentsGuide 20191-https:/www.iata.org/pressroom/facts_figures/fact_sheets/Documents/fact-sheet-industry-facts.pdf2-https:/www.iata.org/pressroom/pr
2、/Pages/2018-10-24-02.aspx3-A large American carrier,which has a multi-team payment strategy committee with representatives from marketing,finance and IT.Another example,a large European airline we work with has a dedicated internal IT team of 15-20 focused purely on payments.Foreword:The balance of
3、payments Bart Tompkins,Managing Director,Amadeus PaymentsRonnie dArienzo,Chief Revenue Officer,PPRO GroupThe payments process is central to the customer experience in many industries perhaps more so in travel.The airline industry has an estimated global revenue of$821 billion,1 and passenger numbers
4、 are expected to double to 8.2 billion within 20 years.2 As it grows it faces major changes in both distribution and payments.The International Air Transport Association(IATA)is forecasting a fundamental overhaul as airlines migrate towards“full retailing”platforms.This will require them to sell to
5、a greater range of customers,both geographically and demographically.They must engage with new emerging markets and millennials and Generation Z buyers with very different expectations to previous generations.Many,if not most,will use online channels.Airlines and agents must contend with digital inn
6、ovation and new entrants into the payments space;an evolving regulatory environment;and changing customer requirements.To face up to these challenges,they must tread a fine line:balancing conflicting demands between cost and convenience,simplicity and security,technology and tradition;gathering the
7、data required for business and regulation,preventing fraud,while also meeting customer demands for a smooth,seamless experience;making sure payments methods move with the times but remain firmly connected with the culture in which travel merchants operate;and focusing on keeping consumers happy and
8、giving them their choice of payments,while keeping costs down.Its a difficult act to pull off.And unfortunately,consumers notice most when businesses fail to deliver.To help define their strategy and manage payments more effectively some airlines have already put in place payments strategy teams,set
9、 up internal payment governance processes,and allocated dedicated internal IT resources to optimize payments.3But in most cases,more needs to be done.With this in mind,Amadeus,experts in travel payments,and PPRO,e-payment specialists and one of the fastest growing fintech businesses in Europe,have j
10、oined forces to help streamline those efforts.If airlines and agents want to meet customers expectations,they need to know what they are and how they are changing.We have therefore looked at payments across the globe,providing a guide to the current payments landscape in different countries to help
11、travel merchants meet customer preferences when it comes to payment methods.Also identified in this report are some of the key trends shaping the travel payments industry both today and in the future.We hope this will help travel merchants as they attempt to navigate the payments landscape,and get t
12、heir relationship with the customer off to the best possible start.2019 TrendsFrom regulation to the rise of the Asia Pacific region,we look at five key trends that will play a big part in determining the future of payments.1.Easy does it:The importance of frictionless payments4-https:/ payment is n
13、ot just a transaction;its an experience.Online,on the phone or in-person,customers want a fast,smooth,seamless buying process.Cost,convenience,culture,personal preference and security concerns all influence the payment methods consumers choose.One size never fits all.The challenge for travel merchan
14、ts is providing as smooth a customer journey as possible across the payments they accept and to offer the choices that customers desire.Its important they get it right:Frustration with online checkout processes is estimated to cost retailers in the US alone$200 billion a year.4 As well as abandoned
15、transactions,friction in the payments process anything that detracts from the speed results in a poorer customer experience,a higher risk of errors and costs in resolving customer issues.An increasing number of travel merchants are therefore looking to offer an omni-channel,consistent payments exper
16、ience.In doing so,they face both practical and technological complications.Travel merchants,particularly if theyre well established,must deal with their technical infrastructures:from front to back-end.This will require highly customized solutions across payment touch points providing a smoother cus
17、tomer experience.Providers will need to offer payment methods that customers want to use.And,of course,both these challenges must be met while providing a secure,cost-effective and compliant process that meets the merchants requirements in areas like reconciliation of payments and back office effici
18、ency.New solutions In many cases,the competing demands may be more easilyresolved with newer payment methods.This can either mean working with or integrating key technologies that can help reduce friction while ensuring security:Tokenization(protecting sensitive data by replacing it with an algorith
19、mically generated number);contactless payments to speed checkouts;real-time,automated fraud detection;and biometric security are just a few examples.For consumers,new options have arrived that make the payments process simpler,faster and less stressful.For travel providers,on the other hand,these ne
20、w options can help reduce their exposure to fraud and increase conversion rates with fewer abandoned transactions which in turn improves the customer experience.This leads to greater satisfaction for the customer,and greater retention for the payment provider.At the same time,however,travel provider
21、s should not abandon those customers who prefer more traditional payment methods.Meeting these competing demands will therefore require a sophisticated payments strategy that takes account of the full range of payment methods,channels and customer segments.It will also require careful implementation
22、 of technologies to integrate with the systems and processes already in place.Striking the right balance is key.New payments technology does not just have to be about the travel transaction.In 2018,Singapore Airlines launched its first digital wallet,Krispay,and turned its frequent flyer miles(KrisF
23、lyer)into credit that can be spent with 38 merchants across Singapore.The merchants include retailers,restaurants and petrol stations.Based on blockchain technology,members use a mobile phone app to convert Krisflyer miles into Krispay credit,which they can then use to make purchases.The app produce
24、s a QR code which merchants can scan to enable full or partial payment.Its yet another example of the ways in which new payments technologies are transforming the travel business.Best Practice:Building customer loyalty with payments technologyKnowing the customer:PSD2 and authentication2.Knowing the
25、 customer:PSD2 and authenticationIt is not just consumers that shape the payments environment;regulators also play their part.The Strong Customer Authentication(SCA)requirements of the Second Payment Services Directive(PSD2)will come into effect on 14 September 2019.They will apply to all electronic
26、 payment transactions where both issuer and acquirer are based in the European Economic Area EEA,except mail order and telephone order(MOTO)transactions.The new rules stipulate that the customers identity must be verified using at least two of three factors:1.Something only the user knows (such as a
27、 PIN or password)2.Something only the user possesses (a chip card,a mobile device,etc.)3.Something the user is (biometric identification such as fingerprint,iris or voice recognition).The European Commissions objective is clear:to make consumers feel safer when buying online by introducing higher se
28、curity standards for online payments.Getting to this point hasnt been easy.The industry has provided a huge amount of feedback to the regulator over the last few years to ensure the result is as close as possible to the spirit of the directive without hampering the growth of e-commerce.In other word
29、s,this has been the ultimate exercise in delivering convenience alongside security.Pragmatism has prevailed and we have seen several use cases carved out as exemptions in the Regulatory Technical Standard:Merchants whitelisted by customers on an issuer basis Recurring transactions with the same amou
30、nt and with the same payee,except when creating or amending the series Low-value remote transactions below 30 with a maximum of 100 cumulative spend or five consecutive transactions Transaction risk analysis(TRA)for transactions up to 500 if transaction monitoring is in place and fraud is kept below
31、 the“reference fraud rate”at each exemption threshold value(ETV).Merchants cannot apply this exemption by themselves;only issuers and acquirers can do so.This is a departure from the current situation where a merchant can decide whether to accept liability for an“insecure”e-commerce transaction or s
32、ecure it by implementing 3D Secure and shifting the liability to the issuer.However,merchants can agree bilaterally with their acquirer to share liability risk and thereby retain control over the customers experience Secure corporate payment processes and protocols for corporate payments if certain
33、equivalent security thresholds are met.These are not set at an EU level;rather,each individual EU member state regulator can decide if the equivalence conditions are met.Lodge cards and virtual cards are expected to be hereThe technology required by travel players to be compliant for payments throug
34、h their direct online channels is relatively straight forward i.e.3D Secure 1.0 or preferably 2.0(since it is more mobile friendly and has a better authentication experience).However,this still requires a multitude of front ends to be upgraded on time,and the Transaction Risk Analysis,seen by many a
35、s the holy grail to preserve frictionless payments in Europe,may not be available on day one.The main challenge for the travel industry,however,is to execute SCA in the many indirect distribution flows that developed over time to best meet the needs of the industry.The secure corporate payment exemp
36、tion,which is expected to cover the use of lodge cards and virtual cards,goes a long way to accommodate bespoke flows,but at present there is no standard for agents to flag this use case.Corporate card issuers will just have to interpret these transactions to the best of their ability.Another travel
37、-specific use case a customer buying a multi-merchant product from an agent(such as a package holiday including hotel,travel and even car rental,for example)is not yet addressed either.At the moment,under the regulations the payment schemes must still define how the agent will authenticate the custo
38、mer on behalf of several merchants.The biggest problem,however confusing several experts in card schemes is that,at the time of the transaction,neither the travel agent nor the GDS system know the acquirer for whom theyre distributing.Its also worth noting that they dont know who theyre supposed to
39、be authenticating on behalf of the customer.Amadeus has been working tirelessly over the last few months to ensure our clients are as prepared as possible for 14 September,and we will continue to work on this topic for many months to come.What is clear is that the travel industry will not become SCA
40、 compliant overnight.It is a much more complex sector than other areas of retail,where it seems as if full compliance will be difficult to immediately achieve as well.Whatever happens,the top priority for all stakeholders must be to avoid a cliff edge on 14 September that would see issuers declining
41、 travel transactions en masse.5-https:/www.iata.org/whatwedo/airline-distribution/Pages/iata-pay.aspx6-https:/www.iata.org/pressroom/pr/Pages/2019-01-08-01.aspx3.Back to the future:The Open Banking revolutionOpen banking regulations in the UK and PSD2 in Europe are a large part of the reason we see
42、the range of payment methods expanding.Compelling banks to share account data and allowing third-party providers to facilitate transactions from their accounts has opened the payments landscape to several new players.The regulations and technology supporting this(principally the application programm
43、ing interfaces,or APIs,that allow information to be accessed)facilitate a range of new services,both from banks themselves and third-party providers,working with them or independently.Much of the innovation in this area is probably still to come.As this area continues to evolve,it is likely to favou
44、r account-based“push”payment methods,as opposed to card-based“pull”options.This is because of two main reasons:firstly,merchants are likely to prefer these as a lower cost payment option;credit card interchange fees alone currently average around$8 billion per year,according to estimates5 and that d
45、oesnt include the costs of chargebacks and fraud.Secondly,customers are likely to favour“push”payments,which give them more control over the payment and reassure them that their sensitive data is protected.In retail,Klarna have recently opened an open banking platform.In travel specifically,IATA has
46、 launched IATA Pay,promising airlines cheaper pricing and speedier settlement.6 Theres no doubt that open banking will bring lots of benefits to merchants,however the value of using banking payment methods for consumers is unclear.Today,card-based payments provide consumers with a number of unique b
47、enefits(such as purchase protection)not offered by other methods.So we have yet to see how adoption will increase in the future.However,one thing is clear:open banking will disrupt our industry.Open banking could also see changes in B2B payments,with suppliers prepared to offer discounts for early p
48、ayment,or for reduced payment costs.In any case,one unexpected effect of open banking innovation is likely to be that more traditional payment methods enjoy something of a revival.Open banking allows an increasing number of payment providers-and merchants themselves-to access customers accounts and
49、make payments directly.This will mean that the proportion of payments termed“bank transfers”will surge in travel,and indeed elsewhere.This term,however,will encompass an increasingly wide range of payments made by market participants and the services responsible for initiating these payments.As the
50、regional variations in dominant payment service providers are already showing(see the Markets Overview),it will be important for travel merchants to identify successful disruptors quickly and embrace them as soon as possible.They must continue to think global,but act local.7-https:/airlines.iata.org
