Innovation in airline distribution and payments is happening even if it goes unrecognised, a panel of experts told delegates at the UATP Airline Distribution conference.

The panel agreed that airlines that fail to innovate and integrate new forms of more flexible payment options like bank-to-bank, split payments or buy-now-pay-later, will lose competitiveness.

Simon Eve, vice president of travel and e-commerce at open banking specialist Trustly, said: “Airlines and travel has always been seen as non-innovative and I think we give ourselves a bad rap on that score.

“We often forget the everyday innovation that happens. Open banking has brought a cheaper form of payment that customers want to pay with and that’s streamlined. That’s the sort of innovation I get excited about – the stuff happening under the hood every day.”

Joao Frias, head of payments strategy and fraud prevention at TAP Air Portugal, said since the Covid pandemic digitisation of payments has accelerated so that today there are more and better integrations offering the end user more flexibility.

“Anyone that will not innovate will definitely lose competitiveness in their business,” he said.

Mark Rademaker, Adyen global commercial head for travel and hospitality, said the mobile phone becoming a payment device prompted an “incredible increase” in non-in-person payments and prompted the emergence of new categories of payment methods that are removing friction.

One of those is split payments where the full cost of a flight can be paid using multiple payments options including loyalty points or a group booking that can be paid for individually by each member using their preferred payment method.

Start-up Hands In is one firm pioneering this technology. Founder and chief executive Samuel Flynn said offering split payments will “unlock incremental revenue for the merchant at check-out”.

Hands In is working with Air Europa and Flynn said: “We are well and truly on track to make this solution a household name.”

Flynn said the concept is new but once they get beyond a “legacy mindset” within airlines and “we deliver a solid product, it goes from concept to must have”.

Frias said innovation in payments has to focus on addressing three main areas: wildly variable transaction decline rates by acquirers and issuers, the costs of transactions, and combatting fraud and the challenge of chargebacks.

He said many transactions are being declined without a clear justification with the situation particularly critical in Latin America where there can be a 30% discrepancy in payment acceptance between acquirers with one as low as 59%. “This is unacceptable. It’s a huge problem,” he said.

Frias said costs are also a main concern because the payments ecosystem is “very complex” and airlines are facing new problems particularly with corporate credit cards for which they need to find a “win win business solution”. Finally, fraud and chargebacks are requiring airlines to invest in new solutions.

Nadine Barth, distribution and payment strategy manager at Lufthansa Group, said: “We focus on payment as a product, payment as a data asset, and payment as an experience. The business case for us is to drive focus across all three dimensions.”

Barth said doing this helps the airline to drive up customer satisfaction levels, reduce payments costs, optimise revenues and build loyalty.

“Rising payment costs pretty much forced us to innovate,” she said. “We have rolled out many new payment solutions. It’s fair to say we have made significant progress in the group when it comes to payment but it’s very fair to say we have a long way ahead of us.

“Other industries are ahead of us and we must learn from them. We are very excited about this distribution and payment journey.”