A shift to airlines distributing more of their inventory through travel agencies is expanding out from North America and going global, according to leading credit card scheme Mastercard.
Speaking at the Airline and Travel Payments Summit B2B in London last week, Esperanza Fernandez, Mastercard director of airlines, set out four key trends it is seeing.
All four trends are driving a more collaborative and transparent relationships with third party travel agencies as airlines look to indirect distribution to boost sales.
Fernandez sad the sector is seeing growth in the “merchant of record model” with airlines more inclined to support agencies to transact direct with their customers.
It is thought this is due to agents being better positioned to offer local payment methods, higher payment approval rates they have, and better anti-fraud protections.
“The US is where this is growing most,” she said, “which is interesting and exciting. In other regions like the Middle East it’s slower progress but it’s happening, the trend is already there.”
Fernandez added in 2024 nearly a fifth (19%) of transactions in aviation were completed with a B2B payments model, up from 15% in 2023.
The other trends Mastercard is seeing is airlines combining their sales and distribution and finance functions so they can better control their payments strategy with agencies.
Airlines are also looking for more transparency from their acquirer partners, and they are embracing virtual card payments to pay out to their vendors and partners.
This unification of airlines’ pay-in and pay-out strategies in indicative of carriers’ seeing greater efficiency of payments as playing an important role in the effectiveness of their retail and distribution strategies and its impact on revenues and profitability.
Fernandez described this as a “win win situation” for travel agencies and their airline partners.
Rowland Camrass, head of commercial at payments technology specialist Checkout.com, said the important factor is “payment performance” and “having that personalised view, owning the complete lifecycle”.
He said driving high payment acceptance rates hinges on “providing the right payment methods to the customer on the website and ensuring that there is a seamless check-out experience”.
More airline insight and control of payments will ensure they are “boosting conversions rates” online, Camrass said, while increasing the efficiency of transferring funds through back-end accountancy and reconciliation systems.
This will help card acquirers take a more favourable view of risks in the sector which will free up working capital, he added.
Alexandra Limerick, senior director of WEX, which bought eNett, the payments division of GDS Travelport in 2020, said online travel agent partners are experts in payments technology and also have the global reach airlines need.
“As the travel market expands, it’s not always about domestic, it’s being present in all markets, having seamless journeys available in all markets,” she said.
Limerick said WEX develops “truly open” APIs [electronic IT system connections] to enable secure and free flow of data connecting a fragmented B2B ecosystem to provide “seamless front-end experiences” to travellers wherever they are transacting and whoever with.
“To give a seamless front-end experience you need a seamless back-end experience,” she said. “It’s about bringing partners together. We look at all of this experience through the connectivity lens and make sure we are open enough to support that.”
Looking further ahead, the panel said innovations in direct bank-to-bank B2B payments and the use of Artificial Intelligence and blockchain will underpin a future of smart connectivity and automation.
Fernandez said Mastercard is looking at how to roll out account-to-account payments flows due to demand from airlines to provide an alternative to card payments.
“It’s challenging because the travel industry to make it work, because it has high transaction values, you need credit.
“With debit cards, which is similar to account-to-account, the number of declines due to insufficient funds is double [that of credit cards].
“With account-to-account in the B2B scenario someone has to provide credit. Mostly it will be the airlines. There are a lot of technicalities that have to be explored.
We do not know when we’ll have a robust solution but we do know there are a lot of airlines willing to explore it.”
Camrass said Checkout.com Is “super-excited” by the promise of AI to “get more value and insights out of transactional data and build out that ecosystem of payments”.
He said AI will drive further automation of payments and blockchain could see smart-contracting further transforming B2B payments and partnerships.
Limerick added: “If you can embed AI and use transaction data in these platforms you can deliver the right payment method at the right time with the right protections.”
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