The International Air Transport Association (Iata) has successfully completed the first Iata Pay ticket purchase transaction in a live test environment, the organisation announced in a statement on Tuesday.
The transaction was conducted in partnership with UK-based fintech company ipagoo.
Iata Pay is an industry-supported initiative to develop a new payment option for consumers when buying a ticket directly from an airline website.
It is enabled by the European Commission’s second Payment Services Directive (PSD2) and the UK’s Open Banking regulation.
These regulations encourage the use of so-called direct debit transactions in which payments are made from the customer’s bank account directly into the bank account of the merchant.
This method is said to offer a high level of security to both user and recipient and can be instantaneous.
Iata’s role is to develop an industry solution that enables airlines to make this payment option available on their websites.
The live test conducted with ipagoo was done under the UK’s Open Banking framework with Iata Pay pilot airlines, including Cathay Pacific Airways, Scandinavian Airlines and Emirates.
Iata Pay will benefit airlines as it offers a cheaper payment option compared with other alternatives; a faster cashflow with instant/near instant payment to the merchant; is highly secure; and a simpler payment process resulting in fewer lost sales.
For consumers, benefits include access to a new, simpler method of payment that is highly secure.
“Today’s consumers, and especially millennials, have expectations of multiple payment options including mobile and peer-to-peer. Iata Pay responds to these expectations.
“At the same time, airlines are trying to manage significant card payment costs – $8-billion a year and rising. A large part of this cost is incurred in direct purchases from airline websites. One of Iata’s strategic objectives is to support airlines’ financial sustainability including controlling costs,” said Iata financial and distribution services senior VP Aleksander Popovich.
Iata is also working with Deutsche Bank on a prototype for Europe, excluding the UK, starting with the German market, which is expected to undergo testing in early 2019.
Following this, Iata will validate the concept with the intention to expand it to other regions.