Why Optimisation is the Best Strategy in Volatile Markets

Latin American airlines operating in an unstable environment can leverage payment optimisation to identify and implement cost saving measures in their payment journey, while simultaneously extracting hidden revenue from their existing payments.

But how does a payment optimisation strategy achieve these results? For carriers in the Latin American market, optimisation takes the form of five key measures:

1. Reducing Acquiring Costs:
   According to a report by the Financial Stability Board, merchant payment acceptance costs for acquiring in Latin America range from 2.5% to 5.0% of transaction value. These rates are driven by a relatively high reliance on local alternate payment methods. But payment optimisation circumvents these costs by seeking the most-affordable acquirers – leveraging real-time payment data to reach the most-affordable or efficient acquirers available.
   
   
2. Lowering interchange and scheme fees:
   Fees paid to third-party processors can also, if left unchecked, become a significant drain on profits. Indeed, according to a study by Edgar, Dunn & Company, 82% of all money spent on payments comes from merchant fees.
   Optimisation reduces these costs by using payment data and rules to vary payment and card types – adjusting routing strategies to lower the total cost-per-transactions.
   
   
3. Boosting approval rates:
   Per a report by the Merchant Risk Council, authorization rates in LATAM can be as low as 16.3%. Payment optimisation works to improve the number of approved payments and reduce chargebacks and cart abandonment through technical solutions such as network tokenization.
   
   
4. Tackling fraud and risk:
   Per a report by Payments and Commerce Market Intelligence, Latin American airlines and travel merchants lose upwards of 20% of their total e-commerce revenue to fraud every year. Payments represent a significant part of this loss.
   Payment optimisation addresses this by removing redundant steps and vulnerabilities in the payment process, as well as tightening digital security while protecting company and customer data.
   
   
5. Enabling alternative payment methods:
   According to our own research into the payment preferences of Latin American travellers, consumers in the region are very much open to alternative payment methods (APMs) and are willing to explore an ever-widening variety of ways to pay for travel. Some of these methods include non-fungible tokens, cash vouchers, installments, local credit cards, and digital wallets. Payment optimisation allows airlines to provide a swathe of new payment options for their customers; helping them reach wider demographics who have more diverse payment preferences.

Thus, payment optimisation is about more than smooth operations. By answering the needs of consumers, and the efficiency of your system, your airline can reduce costs, improve cash-flow and liquidity, boost customer conversions, and tackle fraud with a more secure and safe payment service.