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Will a PSD2 based initiative from the airline sector drive sales and reduce costs?

This remains to be seen. IATA and Deutsche Bank launch a PSD2 based initiative focussed on potential cost reduction with card payments in the airline industry. Certainly an interesting move by International Air Transport Association (IATA) and Deutsche Bank. It could increase pressure on the payments industry regarding costs, innovation and will lead to relevant discussions.  

However all is not as obvious in practice as many questions arise. 

1. There is a mention of direct costs involved, how about the direct revenue based on card transactions? In the PSD2 concept consumers without enough balance on the current account (which says little about their ability to purchase a ticket) will not be enabled to buy the ticket. This is a false positive put in another way and lead to an important reduction of sales. Secondly many airlines surcharge the fees to consumers. 

2. PSD2 will cover the EU region, however airline customers originate from any region in the world. A 100% reach within the EU will mean a establishing a connection with 1.000's of EU banks. There is no business case for that not the time to develop. I understand the start in Germany, the German banking industry is creating a unified API as their banking landscape is fragmented. 

3. Purchases with airlines are considered high risk transactions as the moment between purchase and usage is lengthy and many events can happen in between. The card industry manages this risk effectively. It enables consumers to buy tickets and use a grace period plus the ability to initiate a chargeback if something happens with the airliner. 

4. Mastercard and Visa don't charge its their acquiring members who charge the fees on behalf of issuers, schemes and themselves. As there a many it's up to the airline to negotiate the best rates, this relies and their profile. 

On the positive side I expect this will drive further innovation in this area. 

Based on PSD2 it will become easier for specialist companies to provide a payment guarantee at lower cost and with instant payments a direct complimentary funds transfer. Maybe not from the consumer but his specialist provider who is able to perform a realtime assessments on the consumers profile including the actual balance on the current account as a factor.

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Ward Hagenaar

Ward Hagenaar

Value Creator | Strategy & Business Consultant

Connective Payments

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This post is from a series of posts in the group:

Payments strategies 2015-2020-2030

Payments systems visions, strategies, trends, pilots, forecasting, and planning for the short-, medium-, and far-term.


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