Dave Robinson, Head of Paxport Payment Services
MagnaCarta: What have been the key trends in travel payment over the past 12 months?
Dave Robinson: The implementation of PSD2 on 13 January is a significant development, in so far as airlines are no longer being allowed to put a surcharge on credit card transactions, which means that a large revenue stream is now eliminated. This does not mean that consumers will see any savings but there may be kick-backs for corporates rewarded for virtual card usage.
Another is the advancement of IATA’s New Distribution Capability (NDC) data transmission standard. Some airlines are now driving their capability by charging travel agents a fee on fares booked on GDS’ or systems not using an NDC connection. British Airways and sister carrier Iberia recently started charging travel agents a £8 fee, following in the footsteps of Lufthansa who pioneered this practice two years ago. This is drawing attention to alternative methods of booking flights and brings up a new market where airlines are starting to consider implementing NDC outside of IATA.
Finally, Open Banking has brought a significant shift to travel payment, giving third parties the ability to develop more integrated services and direct fund transfers between different parties in the travel value chain.
MC: Where do you see the future of travel in the next two to three years?
DR: The shift is toward a more integrated and transparent booking process and service for customers. Point-to-point solutions will emerge and non-card payments will start to play a big role in travel – although we might not see full implementation this year, I believe the foundation will be laid for an integrated booking experience in 2018.
Ancillary solutions and pre-ordered, pre-paid merchandising are massive growth areas – we have seen transaction values shoot up from £2.1 billion in 2007 to £28 billion in 2016. This will continue to be a significant revenue driver for both airlines and tour operators. And for the traveller things are set to become a great deal more convenient – once you book your flight, your airline or OTA, whichever you go to first, will be able to directly offer you bespoke services or merchandise by using AI to predict your needs. All at the touch of a button and without the need of third parties.
The emergence of open banking, real-time payments and the growth of mobile will all impact on travel in the foreseeable future. The mobile device will become an increasingly important tool for transferring through the airport, with travellers receiving ping messages and picking options from menus. A recent example is Thomas Cook’s announcement offering holidaymakers the chance to choose their sunbed in advance of their holiday – picking a location from a map that works out when each spot will get sun or shade.
MC: Which travel entities do you feel will dominate the new direct-to-customer opportunity?
DR: Both airlines and OTAs can benefit from greater integration, automation and digitised payment processes. Where the OTAs traditionally controlled the holiday, the airlines are increasingly looking to benefit from revenue streams like car hire, travel insurance, selling seats and pre-ordering meals.
Carriers will dominate unless tour operators build the solutions and encourage (or require) customers to visit their portals.
MC: How is Paxport adapting, and just how important are partnerships in this new era of travel?
DR: We’ve established a separate division for payment services, now known as PaxPay, to address the disconnect in payments between different providers and to develop a fully integrated, automated payment service. Our Virtual Card Travel Payments solution was set to achieve transaction volumes of over £65 million in 2017 – an increase of 54% on 2016. We expect this to grow to as much as £350 million through 2018 following a record series of signings.
Paxport is at the forefront of the ancillary and travel retail opportunity, and is launching PaxShop, the merchandising service including an integrated payment solution, adding additional revenues and an improved, more seamless service for the traveller, resellers and suppliers. Paxport in Scandinavia has a lot of experience in this area and we are now reaching out more into other markets.