Open Banking regulations that create opportunities for new payment methods are being introduced in many countries. At the same time, new mobile and peer-to-peer instant payment options are very popular, particularly with millennials. IATA Pay is an industry-supported initiative that responds to these twin developments by offering a new payment method for consumers when purchasing a ticket from an airline website.
IATA Pay responds to rapid changes in the payments landscape.
- Consumers needs are evolving, for instance with millennials’ expectations for mobile and peer-to-peer instant payment.
- New banking regulations in many countries encourage the use of bank account-to-bank account direct payments. Examples of these regulations the EU’s Payment Services Directive 2 (PSD2) and the UK’s Open Banking regulations,
The IATA Pay prototype has been fully developed and successfully tested in the United Kingdom and Germany markets.
IATA is working with several airlines to conduct similar prototypes and pilots in other global markets during 2020.
Payment costs in the airline industry are significant; credit card interchange fees alone are averaging around US $8 billion per year (Source: Phocuswright) and this is not including charge backs and fraud-related costs. These costs are forecast to increase significantly in the coming years.
The current range of payment methods also has a significant impact on the airlines’ working capital due to the time it takes to settle a payment after it is made.
IATA Pay addresses these issues and aims to create an alternative solution that is cost-effective, highly secure, and improves working capital.
For airlines, the advantages of IATA Pay are:
- Cheaper payment option compared to other alternatives
- Highly secure
- Faster cashflow to the merchant
- Simpler payment process resulting in fewer lost sales.
- Optional white-labeled payment method.
For consumers the benefits include:
- Highly secure
- Enhanced consumer experience
- Seamless user experience
- Potential capability for real time refunds
IATA Pay is a form of payment where the funds are debited instantly from the customer's account and credited in almost real time to IATA's account. IATA offers the added value services of settlement to airline in 24 hours, reconciliation, exceptions handling, refund management and an administrator portal. With other services under consideration including installments and insurance.
Find out more about the high level transaction flow for Airline web ticket purchase (pdf).