The airline industry is a business with airlines looking for ways to increase profits. Those profits don't come from just about anywhere, as people pay to either transport cargo or fly on one of the many commercial flights. Most of the flying public are familiar with the standard procedure of booking and paying for a plane ticket. The task of paying for travel has come a long way since the industry began in the first half of the 20th century, as airlines now earn revenue from more than just the plane ticket. As the global aviation industry is expected to grow over the next few years, we will also see the process and technology for travel payments evolve.
The Fintech Landscape and Accepting Payments in Asia
When the global air travel industry first took off, it was an exclusive privilege of a few. In the 1910s, customers would call the airline by phone for a ticket to be sent by mail. A few decades later, airlines made agreements such as the Warsaw Convention on ticketing standards with details for the customer's trip. That was followed by airlines such as American Airlines setting up their own central system to handle all bookings. Over the last half of the 20th century, we've seen the rapid development of travel booking thanks to the internet. Today, customers can simply go on an airline's website to select flights, pay for a plane ticket with a credit card, and print out an itinerary within minutes.
As the internet has made booking for travel faster and easier, one variable that has not changed: the task for airlines to accept payments from passengers. Airlines do provide the option to pay for flights using a credit card, but Asia's fintech industry has seen a varying degree of preferences when it comes to accepting payments. Countries such as Japan, South Korea, and Singapore have a population with majority of their residents having a bank account and credit cards. This is not the case for countries such as the Philippines, Indonesia, and Thailand, where the opposite is true.
While most of the aviation industry relies on accepting credit card payments, cash is still king for most parts of the Asia-Pacific region. Businesses in Asian countries with low credit card penetration rates or bank account ownership have developed other aproaches to accept payments. We can see examples of this in the Philippines and Thailand, where customers could pay for their plane tickets at popular department or convenience stores such as a local 7/11. Unlike in most parts of the world, Uber has also had to adapt to the regional preferences by offering the option to pay for rides with cash as well. The observation can a bit confounding given the improvements thanks to technology in the region, where mobile usage has skyrocketed over the last decade.
Digital, Mobile Wallets
In 2017, the world saw the rise of Bitcoin as the decentralized cryptocurrency made headlines for its rapid rise in value. While the world paid attention to how much Bitcoin was worth, those in the tech and financial industries saw the potential in the underlying technology - blockchain. The technology is simply an openly distributed ledger with a design to make modifications difficult. Airlines are starting to take notice, as Singapore Airlines announced recently it would develop its own app with blockchain technology for members of its frequent flier program, KrisFlyer.
The recent developments has led to companies exploring blockchain, which could be a good fit to address the many of those unbanked in Asia. We could see airlines following Singapore Airlines on its application of the technology for frequent flier programs, which could eventually lead to having the ability to pay for flights with it. For now, the airline will provide an option for KrisFlyer members to shop at retail partners in Singapore. Eventually, technology such as blockchain could be expanded so travellers won't have to heavily rely on exchanging cash for local currency when abroad.
In addition to blockchain and cryptocurrencies, we could see a bigger evolution of how money is transacted. Tech companies such as Adyen and social media companies such as China's WeChat have developed new mobile payment options. Whether the new technology allows for payments to be made in a particular country's currency or cryptocurrency, it could be not just be helpful for customers to make payments for their travels. It could also prove to be helpful for inflight purchases on flights that help airlines generate revenue such as food/beverages or duty free purchases, which could be done simply with a mobile device.
Transparency and Ease of Payments
As payment methods are expected to evolve, travellers have an expectation to get what they pay for. Asian airlines large and small have in the last few years come under criticsm online for unanticipated charges. These charges include using credit cards as well as the inclusion of travel insurance during the booking process. Other problems that have emerged as airlines rely more on technology for accepting payments include mistake and failed payments. Over the next few years, airlines will have to constantly receive feedback and continue to improve their online booking experience.
Airlines will still have to continually improve their online booking experiences, as well as maintain their online infrastructure. With the amount of data an airline may have about travellers, airline company websites are a prime target for hackers with bad intentions. Throw in payment and personal information, and airlines have a large responsibility to maintain a high level of data security while meeting customer expectations when it comes to booking and paying for travel.
As Asia's aviation industry evolves, we can expect to see new developments to address the large populations who are playing a large part in the growth of aviation in the region.
Travel payments and other key topics about the aviation and travel industry in the Asia Pacific region will be discussed at next week's Aviation Festival Asia Singapore 2018. Get your FREE expo tickets to Aviation Festival Asia now! Join us on 27-28 Feb in Singapore and gain access to 40+ free sessions of content, 50+ exhibitions and network with over 1,000 aviation professionals. Find out more: https://goo.gl/YppDPE #aviationfestivalasia