The International Air Transport Association, an association representing most of the world’s biggest airlines, has mandated Singapore-based fintech 2C2P to connect its coterie of payment channels to IATA’s own “payment gateway”.
The mandate is part of an effort by IATA to embed financial services so that its members, the world’s major airlines, can keep pace with nimble low-budget competitors that have been quicker to embrace new payment methods.
Payments are also a springboard to help airlines connect more directly with consumers, including hard-to-reach business travelers, and enable carriers to pitch more tailored offers or cross-sell other services.
Amine Boulaghmen, IATA’s head of payment facilitation solutions, says the association is focused on helping airlines accept payments seamlessly from all types of methods.
“We help airlines be more customer-centric,” he said. “Payments is part of optimizing those relationships [between airlines and their customers].”
Reaching passengers everywhere
This isn’t exactly new, but digital finance has transformed what “engagement” can mean. IATA was founded in 1945 in Montreal. Since the 1970s it has provided airlines and travel agencies with centralized services for billing and settlement.
But for the past five years, IATA has made omnichannel payments a priority. In 2018 it launched IATA Financial Gateway, a platform with airlines on one side and a variety of payment processors on the other.
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The latest agreement adds 2C2P – itself an operator of a payments marketplace – to this gateway.
However, 2C2P is not just another vendor, but a longstanding supplier to the travel industry of payment solutions across Asian markets. The firm got its start 18 years ago servicing consumers, airlines and travel agencies operating in Bangkok, a major tourism hub. It also caters to e-commerce and big Silicon Valley tech companies looking for Asian payment channels, but travel remains a major industry vertical.
Carriers catch up
For most of its history, 2C2P’s biggest job was to help Asian consumers use credit cards to pay for travel. Today the growth has moved to QR code-based payments tied to domestic real-time payment systems.
“There’s a segment of travelers who don’t have access to credit cards,” said Nattapote Kuslasayanon, international business director at 2C2P in Bangkok.
The airline industry has generally two types of payment business models: consumers, and businesses, which includes travel agencies.
Big airlines get most of their business through B2B channels, particularly for business travel, which can involve complex arrangements including hotels, ground transport, and insurance.
Budget airlines grew into dangerous competitors to incumbent carriers in part by targeting consumers directly, and then building the capability to manage omnichannel payments.
The big airlines lag in this capability and are keen to get a slice of the pie in cross-selling related travel services, particularly to the well-heeled business set. The COVID-19 pandemic, which has been disastrous for the industry, makes finding ways to connect with consumers and develop loyalty all the more urgent. Payments are the starting point.
Kuslasayanon says credit cards remain the major form of B2C payment in Asia. Most users are comfortable with cards, which can be used to pay for large transactions as well as generate rewards such as air miles. This makes cards a large and stable segment.
Other than credit cards, there is a range of alternative payment methods. These include internet banking or mobile banking (often as bill-payment functions), bank transfers, and cash over the counter at convenience stores, post offices, or other consumer outlets.
In the B2B space, alternative payments like bank transfers and cash over the counter are more common, especially for smaller and mid-sized online travel agents. (IATA has its own branded wallet, IATA EasyPay, that travel agents use to settlement payments for tickets, and 2C2P is already a partner on this platform.)
More recently, QR codes fronting e-wallets, using domestic faster-payment systems, have become popular forms of alternative payments, especially as governments in Southeast Asia promote their use. QR payments are digital and contactless modes of payment that connect to domestic real-time payment networks, such as Thailand’s PromptPay or Singapore’s PayNow.
QR payment is supplanting other alternative payment methods, rather than impacting credit card usage. But QR payments have limitations, notably a cap on transaction sizes; and no alternative methods offer frills like points for miles.
Regardless of the channel, Kuslasayanon says embedded finance is blurring the lines between airlines, fintechs, banks, and other merchants in the travel industry. He hopes this deal with IATA will encourage more banks to outsource their payment work to 2C2P.