Written by Jacqueline Chilton based on a speeches and panel discussion at ATPS 2009 – Airline and Travel Payments Summit (Link to presentations) – Save the date for ATPS 2010 in San Francisco, Nov 30 – Dec 1, 2010
Localization is one of the key trends influencing the future of payments. At Glenbrook we believe that although businesses and consumers travel, sell and source globally, payments are inherently local. Many merchants are looking to expand Internationally and as they do so are confronting domestic payment options in foreign markets. Many are wondering whether or not acceptance of these incremental payment methods will improve the bottom line.
The most important thing in selling anything – a service, digital goods or physical goods – is to get paid. Lower cost is nice, but growing the top line is even more important than reducing expenses
So why consider local payment alternatives? There are three reasons: 1) the promise of increased sales, 2) lower transaction costs and 3) improved processes.
At the Airline Travel and Payment Summit, Colm Lyon (CEO of Realex Payments – a leading European payment service provider- suggested you need to be in appropriate payments, not every payment type. Much like the alternative payments discussion of the day before (See “Alternative payments and Airlines”), making a solid business case in choosing which payment and where is critical.
In markets where international credit card penetration is low, local payments become essential. It is important to assess the local preference for debit, bank transfers or cash, at what ticket size, which channels and for what types of merchants. Local payment options can add to consumer convenience and potentially increase consumer adoption.
New customer segments can be targeted that are not interested in, or are unable to get international cards. We heard from paysafecard at ATPS 2009 that cash payments can attract new customers. They measured that 52% of customers using their cash ticket vouchers for online payment were new customers to the airline on which they bought a flight.
Local payments can also have significantly different acceptance costs and fraud rates and access to dynamic currency conversion. Some payments use a good funds model with lower disputes and chargebacks, such as iDEAL in the Netherlands. There is a clear need to understand the risk framework for disputes, chargebacks and fraud as these can drive up the cost of acceptance.
Integrating to domestic processing can improve speed of payment processing and also support local customer service in response to payment questions. The challenges come in the implementation, potentially in settlement timing / workflow and increased complexity in back office and banking relationships.
The panel discussing local payments at ATPS 2009 was:
- Klas Bäck , President, Netgiro North America
- Paul C. McTaggart, Sr Product Manager Global Payments & Risk, Expedia, Inc.
- Katherine Abbott, Vice President & Treasurer, Orbitz Worldwide, Inc.
- James Filsinger, CEO and GM, Moneydirect
Netgiro is a full service payment solution provider for e-merchants around the world. They provide global payment processing as part of the Digital River Group Global ecommerce solutions company. Klas identified the key decision criteria in selecting local payment options and discussed how to identify where to be in the future. New payments can be evaluated with a business case and the implementation needs to be justified with sales. Netgiro supports online companies like Expedia and Orbitz in simplifying their acceptance of local payment types in foreign countries.
Expedia is taking a ‘go local’ approach to optimize the costs of payments and offer local payment methods. Orbitz is also taking a local payments approach. Both discussed the benefits in customer acceptance and challenges in implementation. In particular they pointed to the complexity of the number of foreign banking relationships required to accept direct deposit from all domestic banks. In looking at local payments options, the payment settlement timing and how it fits to the current order to delivery process are key considerations.
Moneydirect is focused on the complexity of business-to-business payments in the Airline and Travel space. James highlighted the complexity of collecting net payments from travel agents, paying hotels for airline crew lodging and transportation, paying suppliers for ancillary content, providing appropriate vouchers for stranded passengers, keeping up with regulatory compliance and making it all reconcile despite the multiple countries and currencies. Solutions like Moneydirect (an Amadeus and Sabre joint venture) provide multi-channel payment processing solutions to support business-to-business payments in the travel industry globally.
Payments organizations looking to expand their local payments options should consider their payments vision – What is motivating the company to consider local payments options? Payments can organizational cut across many departments that need to be heard as the local payments strategy is developed. With the vision in mind, a business case should be built with local knowledge of payment acceptance, expected incremental sales, processing costs and implementation considerations for work-flow and banking relationship requirements.