An airline perspective: Assessing the payment landscape in Latin America

There may be no global region more dynamic and exciting for commercial aviation than Latin America. Though it has long been considered a high-growth emerging market, the region’s air travel sector experienced a comparatively rapid post-pandemic recovery and appears poised for particularly significant growth in 2024.

But Latin America is also one of the most complex markets to enter and serve effectively in terms of payments – especially for airlines, which must contend with a high volume of cross-border transactions, multiple regulatory environments and a growing roster of new and traditional payment methods.

To master the Latin American payment landscape, airlines must embrace advanced strategies like Payment Orchestration which can accommodate the divergent demands of travellers while taming the complexities of regional payment processes.

As befits a region that includes 33 nationalities and countless subregional distinctions, this emerging middle class exhibits a wide array of needs and preferences. Because of this, serving the diverse LatAm marketplace requires a sophisticated and equally diverse payment strategy.

Latin Americans use various alternative payment methods (APMs) from country to country – from bank transfers and cash vouchers to installments, local/regional credit cards and full-functioning mobile wallets like Apple Pay.

GlobalData’s 2021 Financial Services Consumer Survey found the proportion of respondents who utilised mobile payments was much higher in Brazil (65%), Chile (55%) and Argentina (68%) than in major Western economies like the US (43%), Canada (34%) and France (31%).

An Inter-American Development Bank study revealed in 2020 a 67% year-over-year increase in mobile bank accounts throughout Latin America, a percentage driven by the start of the pandemic but that almost certainly has increased since. Online payments by bank transfer also more than doubled in this period, and contactless payments now comprise 50% of all face-to-face Visatransactions.

The LatAm aviation market is also at the cutting edge of new payment innovation, including the emergence of NFT (Non-Fungible Token) flight tickets through initiatives like TravelX. This concept empowers consumers to buy flight tickets as NFTs, allowing them to resell and update the passenger information when they do, up to 72 hours before the scheduled flight departure. The airline receives the transaction fee with every resale, fostering a symbiotic relationship between the airline and the passenger. The convenience and flexibility offered by NFT tickets have the potential to reshape the ticketing landscape, marking it an exciting trend to observe as Argentinian LCC Flybondi becomes the first airline to implement it.

Latin Americans are clearly enthusiastic about non-traditional payment methods and willing to explore an ever-widening variety of ways to pay for travel.

In Latin America, airlines need to be able to quickly add new payment methods in new markets and for new customers as their route networks evolve.

Consumers in this region expect their payment experiences to be seamless and aligned with their preferences. Creating a centralised payments infrastructure that integrates with consumer-facing channels (website, app) allows airlines to support the major LatAm APMs and provide the preferred payment form in each sub-region or country. This will enable airlines to manage and optimise payment experiences for travellers while still increasing market share in a fast-growing region.

Payment Orchestration can significantly enhance the implementation of APMs for airlines by simplifying technical integrations, augmenting revenue management, improving the customer experience, and providing operational efficiency. It enables airlines to offer various payment options while managing risk and compliance effectively.

Payment Orchestration also facilitates interoperability between payment methods, one of the dominant Latin American payment trends for 2024, as identified in a recent Americas Market Intelligence (AMI) report. Consumers in the region expect and demand the fluid, frictionless movement of money between multiple banks, e-wallets, and apps and anticipate the same seamless experience from their ecommerce interactions with airlines. Having Payment Orchestration in place helps airlines create these frictionless experiences and coordinate multi-channel payments on the back end.

Several airlines in the region already recognise the importance of supporting emerging payment methods and utilising Payment Orchestration to do so. Beyond Flybondi’s foray into NFT ticketing, globally recognised airlines like Avianca and GOL have embraced Payment Orchestration as a way to optimise and centralise their payment systems, streamline their ability to introduce new payment options and improve their capacity to expand in the LatAm region.

Latin America will be the region to watch in 2024 for commercial aviation, not just for its projected growth rate but also for the richness and variety of its payments landscape.

While complex to navigate, this landscape also presents opportunities for those airlines that take the necessary steps to adopt flexible, configurable payment solutions that give them the agility to seize their chances when they arise.