Insights 02 November 2018 By: Madeleine Funes

How Can Airlines Strengthen their Direct Channel? (Hint: Working with Multiple PSPs is a Start)

Over the past 12 months, I’ve had more digital and ecommerce teams within airlines asking me how they can increase conversion rates and reduce costs in the direct channel. This topic comes up most often in discussions with European low-cost carriers (LCCs), whose business model has thrived, but whose online distribution and digital marketing costs remain an area where savings can be made.

At the same time, I’ve seen full-service European carriers face the same challenges even though they may have more resources to devote to optimizing their direct channels. The cost of doing business online includes payment transaction fees, distribution fees paid to GDS suppliers, rejected transactions charges, cross-border payment fees and foreign exchange costs.

But whether they are full-service carriers or LCCs, their needs remain the same: reduce costs, increase revenues.

How European Airlines Can Strengthen the Direct Channel

This is where having multiple payment options and providers is effective. As a payment service provider (PSP) offering a wide range of alternative payment methods and innovative features like intelligent transaction routing, we’ve been enabling European airlines to immediately improve direct channel revenues and reduce abandoned and rejected transactions.

As mobile commerce continues to grow, more European passengers are going from search to purchase entirely via their mobile device. Nearly half – 45% – of smartphone users in the UK are comfortable researching, booking and planning their entire trip using only a mobile device, as are 44% of French smartphone users.

For these users, any disconnects or friction in the mobile booking process – whether due to poor UI/UX or issues such as payment page re-directs – will result in abandoned carts, transaction drop-outs, and loss of brand equity.

Ultimately, there are fewer lost bookings (and more revenue) in the direct channel when airline customers can make payments using their trusted mobile wallet, or when they can make a cross-border purchase in their own currency without the transaction being rejected. To achieve this, PSPs often need to be able to expand their airline customers’ payment capabilities beyond their existing acquirer network.

Evolving Traveller Needs Shouldn’t Scare European Airlines

Airlines have traditionally processed payments country-to-country, but changes in traveller expectations are challenging the status quo. Traditional PSPs were able to handle the occasional new airline route, which required a new integration with the local bank acquirer. But with airlines continuously expanding and evolving route networks – and their customers using hundreds of different payment methods, from Boletos in Brazil to Alipay in China – traditional PSP providers could not possibly handle all of an airline’s payment needs, and they don’t have to anymore.

That’s where newer PSPs like CellPoint Mobile have been able to add significant value by providing competitive, flexible, and faster service to European carriers; satisfying a need created by traditional PSPs who may lack the time or resources to easily add the required bank or payment method connections.

We’ve helped airlines identify the alternative payment methods that will have the most impact with their passengers, and implemented them through our Velocity payment platform, supporting web, mobile-web and native mobile app bookings. Deploying these solutions without the time- and resource-intensive process common in the payments industry.

This integrated, quick-to-market approach has helped those airlines to meet the expectations of their passengers for a frictionless booking experience using the payment method they prefer.

When European airlines ask me how they can increase conversion rates and reduce transaction processing costs, I tell them they should consider a multi-PSP approach that can give them the flexibility and agility they need to stay competitive. Finding the right solution that can both reduce cross-border transaction charges while increasing conversions can significantly impact the airline’s bottom-line.