Airlines Turn to Orchestration as Consumer Payments Preferences Multiply
As talk in payments circles turns more and more to localization and alternative payment methods (APMs), smart routing and payments orchestration is stepping up as a solution to the soft declines and complex billing issues that attend air travel, especially international.
To that end, London-based FinTech CellPoint recently announced its latest airline deal, this time with Icelandair, as more carriers seek to simplify the tangle of familiar card schemes, APMs, and mushrooming local payment methods for efficiency and savings.
CellPoint Digital CEO Kristian Gjerding told PYMNTS that Icelandair sought to spread risk across multiple acquirers “to reach and balance traffic between those in an intelligent way,” and “the ability to deliver payment methods into their channels at pace, servicing consumers or travelers with whatever forms of payment would be suitable for any given market.”
Starting with Emirates in 2013, CellPoint Digital now counts Virgin, Southwest, Cebu Pacific and Avianca as clients, with more deals to be announced in coming months, he said.
What these carriers are after is payment orchestration capabilities that tidy up the back office in terms of the complexities of dozens of payment methods being used, getting integrated with various acquirers, and “giving them the ability to decrease cost based on the flexibility in terms of local versus cross-border acquiring, which is always something that airlines are looking to do,” Gjerding said.
That quickly graduated from platform payments to more sophisticated abilities, “what we call value analysis or value-based payment orchestration, which is all about how you not only decrease cost, but even more importantly, increase conversion rates.”
“I think that’s where they’re looking to gain the largest sort of financial value,” Gjerding said. “We’re delivering somewhere between 6% and 12% return on flow. What that means is on $100 million, we’re delivering between $6 million and $12 million in ROI per year. If you’re passing $1 billion it becomes serious money, but even at $100 million, it’s pretty good.”
Read: CellPoint CEO Says Payments Orchestration Reduces Transaction Turbulence as Air Travel Rebounds
Relieving Payments Pressure for Carriers
The particulars of the Icelandair deal are common as payments have grown considerably more complex during the pandemic years, and many airlines are catching up to those changes.
Calling airline payments more complex than other types of payments in several ways, Gjerding said, “When you book a ticket, you don’t want to issue the ticket before you receive payment. You don’t want to hold inventory that you could otherwise sell to somebody else.
“Then you’ve got the other problem, which is pricing changes every second, right? Not quite, but it changes often. It’s based on a whole range of different components. Then there are all the subsystems in the airline environment and how they track not only the payments which are completed, the passenger details, but also the form of payment.”
That then gets into the need to issue refunds, partial refunds, perform chargebacks, and reconciliations across multiple providers, to name a few. Orchestration and smart routing to appropriate gateways solve much of this, hence the increased interest.
CellPoint Digital handles that. “We do integrations to the various providers like Amadeus, etc., and what that gives is the ability to provide a lot of that functionality out of the box. We’re decreasing the pressure on the back office regarding launching different acquirers, forms of payment, etc., then also in the operational side of things,” he said.
Saying that CellPoint Digital recently partnered with global PSP Nium, among others, Gjerding said, “We’re providing a whole range of services from fraud to payouts ... in that one combined access point. We are simplifying the entire management of what we call the financial supply chain, which is a lot of different touchpoints in the airline space.”
See also: CellPoint, Chargebacks911 Team to Optimize Merchant Payments
Increasing Revenue While Lowering Costs
Most of CellPoint Digital’s work is invisible and seamless to the customer — that’s essentially the goal — streamlining payments processing can vastly improve customer experience.
“From a passenger perspective, this is about getting the ability to pay with the form of payment that’s relevant in your region, or based on where you’re coming from,” he said. It’s easier said than done, and the pressure is on as the platform constantly sees new payment types.
Gjerding said, “We’re seeing everything from a high degree of sophistication on alternative forms of payment, the most well-known are Apple Pay, Google Pay, PayPal, and so on. But if you look at it on a global basis, there are thousands of payment methods out there, and some are really ruling a given market.”
To assist airlines in optimizing cashflow from so many different payment types, CellPoint Digital has an internal consultancy “that helps our airline clients analyze what we call the value-based routing to say, hey, this is the most optimal ecosystem, and this is how we’re going to set up the routing rules in our intelligent routing engine to help you maximize conversion,” he said.
“You increase conversion, which is more revenue, and we help you decrease cost.”
To do this, the platform analyzes performance on 12 key measures, comparing a carrier’s data to best practices and outcomes to ease the processing burden and create that return on flow.
As for his outlook on the travel market in a year that’s poised for more macroeconomic turbulence, Gjerding looks back at mistakes that were made during the depths of the pandemic and the problems that were created for air travel in 2023. Even so, he’s optimistic.
Whatever shape it takes, payments orchestration for air travel is “the next wave within FinTech, if you wish, the next platform wave where we’re seeing the progression from gateways to full-service PSPs, and now we’re moving into the orchestration space.”