On-board POS “going away fast” for airlines

Point-of-Sale terminals (POS) are “going away fast” as the go-to method to collect in-air payments, according to Kristian Gjerding, CEO of CellPoint Mobile, the mobile commerce specialists.

“The number one problem for airlines,” says Gjerding, “is that you have an archaic form of payment technology unsuitable to the modern world which is becoming obsolete in the face of demand from consumers for more flexible, convenient mobile payments.

“There are various parts to the way you finance transactions from the acquirer, PSP or scheme perspective where you add surcharges to card-not-present and similar. It’s a whole range of additional costs that can add up in various scenarios,” says Gjerding.

For ECR systems, a UK provider of POS terminals and software, launching into the airline business has thrown up similar challenges.

“I have a lot of cynicism for all these rules and regulations,” said Simon Pont, CEO of ECR retail systems, at the Transport Ticketing Global event. “If you’re big enough and ugly enough,” he said, “you’ll get away with it and a bank somewhere will agree to do it.

“We were approached through a partner who operates within the airline sector who had won a contract with an airline that was already using a Canadian system. These guys were flouting every single rule, including taking Apple Pay offline. We checked with Apple and they said that wasn’t allowed,” said Pont.

Airlines must adhere to both the EMV global standard as well as PCI compliance – where both Gjerding and Pont believe enough challenges lie in compliance – before even discussing local laws and the logistics of settling.

“Fundamentally,” said Pont, “EMV type 23 means you can acquire offline (up in the air) and settle within 24 hours to meet the requirements. We achieved that six months ago.”

ECR retail systems expanded into the airline sector a year ago with two airlines, one of which was particularly challenging due to local legislation.

“A major problem we encountered while testing with a Chilean airline was that roughly 20% of Chilean local cards have to be online-online and so must transact in pesos cannot transact overseas and need to be settled in a local bank.

“The rules suit them down in Chile, but they don’t fit anywhere else in the world. We transact in pesos and Credorax – our partner – agreed to settle in Euros and we’d pay back in US dollars,” said Pont, adding a similar case ECR encountered while working with Serbian Dinar.

“Everybody is gravitating to the simplest solution,” says Gjerding,”that is most cost effective where the responsibility for regulation compliance sits with the payment service provider.

“POS machines are heavy, costly and slow. Airlines will also need multiple POS terminals per plane, which is a distribution nightmare. In reality, and even with WiFi happening, most of these terminals are running offline and batch reconciled when the plane lands,” he says.

Despite several airlines already supporting non-card-based payments for in-cabin purchases, including Lufthansa, Ethiopian Airlines, and Finnair, which doubled its inflight sales when it began accepting Alipay payments a year and a half ago, Gjerding argues that POS solutions aren’t inclusive enough of emerging payment methods.

“ApplePay and Google Pay are increasingly becoming mainstream, but there are plenty of AFOPs that can’t be used on the plane. In many regions, bank cards aren’t the predominant method and that means that a lot of ancillaries aren’t being sold,” he says.

According to WorldPay’s Global Payment Report released in November 2018, 74% and 75% of Chinese and Indian millennials (respectively) use mobile wallets at point of sale. Globally that equates to 28% of all millennials, compared to 20% of all other age groups.

A study by Nielsen found that 69% of Chinese tourists favoured mobile payments with an 93% indicating they would spend more were their preferred payment method more available internationally.

Lost ancillaries aside, Gjerding believes there is a far simpler solutions for airlines to sell on-board ancillaries, reduce customer payment friction and get around regulatory compliance – the reason being that wifi is becoming more widespread in flight, by customer demand.

This was the case for American Airlines’ Boeing 737 MAX fleet in 2017, when they replaced investment in seat screens with high speed internet to be used on customer owned screens.

“The next step is to make on-board POS mobile payment capable,” he says. “The basic technology to mitigate this challenge is there and PCI certified online payment capabilities is a well known entity.

“Now you can totally eradicate the cost of technology for POS terminals into an online reality utilising high speed wifi. It’s exactly the same as when you shop online. I log onto my loyalty profile, it stores my credit card details and I pay for my wifi.

“I’m essentially accessing a traditional web portal with a payment capability; it’s online and a real time connection to the ground using wifi. You just need to attach an ordering system.”

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