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07 Oct 2017

How do you solve a $10bn problem?

Todd Clyde


They say travel broadens the mind. Recently, I had the privilege of heading to Dublin to attend the IATA World Financial Symposium, a gathering of the good and the great from the airline industry.

And, this is an industry with some staggeringly large numbers and some surprisingly small numbers!

With an expected 38.4 million flights, delivering about $736 billion of annual revenue and margins on the up, the industry is in a positive mood. It’s some of the other numbers that really jumped out at me though. A few examples are the high costs of taking payments from customers, estimated to be a staggering $10 billion p.a. Another is the mind blowing figure of unredeemed air miles - 24 trillion. That is a lot of weekends away!

Alongside these huge numbers, there are some that surprise you for the opposite reason. For example, net return of only $7.54 per passenger. How much could this be increased just by making payments easier? My suspicion, a lot!

From the debate at the conference there appear to be a number of big pain points:

  1. Cost and complexity of taking payments - it is particularly high since it is based on a % of the transaction and airline tickets are obviously higher cost than many other categories of spend.
  2. Data - a lot of data is generated in a travel booking and customers want it, easily accessible with the transaction. Particularly companies with employees travelling!
  3. Friction - the industry is aspiring to seamless payments to make customers’ lives easier and help generate ancillary revenues. If payment is fast and simple the lounge access, that extra cocktail or a car on arrival is just a tap away.

So why was I there? To make the point that the opportunity to solve these pain points, and really drive a positive impact for airlines and their passengers, is here now.

The much awaited PSD2 will enable direct access to customers accounts (with their permission), and this creates a tremendous opportunity for the airline industry to really take off :-). At Token, we’re really excited about our role in driving this change.

Firstly, direct bank payments could dramatically simplify the payments value chain, putting buyer and seller closer together, and reduce the estimated $10bn cost of taking payments. But more than that, we’re working to make payments really deliver more for the airline and traveller, such as:

  • Capturing all of the rich travel data (e.g. itinerary, cost breakdown etc) with the transaction so it can be accessed or fed into company expense systems
  • Connecting the traveller and their accounts throughout their journey, making everything seamless (e.g. On my return flight it would have been so much easier to pair my identity with my seat, 16A, and then without providing any personal details or payment credentials I could easily get that extra beer or pay with all of those unredeemed air miles and many more examples).

These are just a few examples and we discussed many more.

So, having travelled and learnt, I return to the Token office in London with my mind broadened and excited about the opportunity to make payments a far more intelligent part of the travel experience.