International airline body IATA has successfully completed its first live trial of a direct payment system designed to save airlines billions of pounds in card charges.
IATA Pay is being developed as a new payment option for customers buying tickets directly from airline websites.
Payments will be made directly from their bank accounts to the airline’s account, offering a high level of security, said IATA.
It said that for airlines, the advantages were:
* Cheaper payment option compared to other alternatives
* Highly secure
* Faster cashflow with instant/near instant payment to the merchant
* Simpler payment process resulting in fewer lost sales.
The first live payment has been made in a trial conducted in partnership with ipagoo, a UK-based fintech company.
IATA said the new industry-supported initiative has been made possible by the EU’s second Payment Services Directive and the UK’s Open Banking regulations, which encourage use of direct debit transactions, in which payments are made straight from the user’s bank to the merchant’s bank account.
IATA’s role is to develop an industry solution enabling airlines to make this payment option available on their websites.
The live test conducted with ipagoo was done under the UK’s Open Banking framework with IATA Pay pilot airlines, including Cathay Pacific Airways, Scandinavian Airlines and Emirates.
“Today’s consumers, and especially millennials, have expectations of multiple payment options including mobile and peer-to-peer. IATA Pay responds to these expectations,” said IATA’s senior VP of financial and distribution services Aleksander Popovich.
“At the same time, airlines are trying to manage significant card payment costs – $8 billion per year and rising. A large part of this cost is incurred in direct purchases from airline websites. One of IATA’s strategic objectives is to support airlines’ financial sustainability including controlling costs.”
Ipagoo CEO Carlos Sanchez said: “We are delighted to have completed the first Open Banking live transaction for the airline industry, helping IATA and its member airlines to achieve their goals of operational and financial efficiency.
“Ipagoo’s technology provides a secure, multi-country banking service for IATA. We are at the forefront of development and innovation within the financial industry and committed to helping businesses and their clients take advantage of the opportunities provided by Open Banking.”
IATA is also working with Deutsche Bank on a prototype for Europe (excluding the UK), starting with the German market, which is expected to undergo testing in early 2019.