The mobile-centric gap costs travel operators significant revenues
A number of articles and research papers have examined the airline industry's move into e-commerce, especially mobile commerce and payment innovation, creating one common theme: airlines tend to lag other industries in embracing the new technology.
A recent Aviation Week commentary noted the great potential for value creation from a "digital airline," but it pointed out that airlines have been slow to adopt digital functionality. The applications currently being implemented tend to be fairly small-scale, and they focus primarily on delivering customized information to smartphones.
With an estimated $817 billion expected in digital travel sales globally by 2020, airlines are missing significant revenues by failing to exploit the potential of mobile commerce and payment innovation. It's great to pick up a smartphone to confirm a departure time or board a plane. But with such a narrow informational focus, airlines lose the opportunity to increase the sales of profitable ancillary services while also building customer loyalty.
The explanations for airline foot-dragging are varied. Most of the challenges hinge on a lack of confidence in the potential of mobile payments to drive increased revenues, or concerns about security and convenience. Leaders in the digital payments arena have aggressively tackled security issues with such approaches as tokenization and the use of biometrics. And the convenience factor steadily improves as vendors, financial institutions and the payment industry collaborate to set common standards and technology.
If airlines adopt mobile payment and transaction technologies in a secure and sustainable manner – such as partnering with payment platform providers, technology innovators and vendors that are already leading the charge – they will be successful in winning not only appreciation of passengers who are looking for an expanded array of mobile travel options, but also the added ancillary revenues that emerge by providing travelers with high-quality, convenient and reliable products and services that their total travel needs. Travelers will use their mobile wallets and other supported payment methods to purchase products and services directly from airlines via their mobile devices – allowing airlines to collect direct-channel revenues.
Airline inaction around mobile commerce and payments increasingly runs counter to the expectations of today's customers. Today's travelers are accustomed to increasingly effective digital transactions from companies like Amazon or their Uber app. As Airline Trends points out, innovative products and services in one industry raise the bar for all industries.
Airline Leader, a strategy publication for airline executives, has noted that airlines at an advanced e-commerce stage realize the benefits of better economic performance and stronger brand attraction, including:
- E-commerce drives loyalty while supporting new pricing and revenue models.
- E-commerce allows airlines to gain competitive advantage by re-engineering business processes related to sales, marketing and customer service.
Gartner has predicted that 50% of consumers in the mature markets of North America, Europe and Japan will be using smartphones or wearables for mobile payments by 2018. While this prediction may be somewhat optimistic, the truth is that mobile payments are building momentum as more companies and industries see opportunity in the revenues and profitability that arise from the mobile marketplace.Airlines were among the first industries to embrace the internet, and in many ways the industry has been a technology leader. However, that is not true for mobile commerce and payments. As Airline Leader concluded, "Airlines in less developed e-commerce stages are going to fall proportionally behind their leading rivals."
Kristian Gjerding Kristian Gjerding CEO of CellPoint Mobile, a payment solutions provider for airlines. Gjerding has helped shape the digital payments environment through his work with best-practice standards groups at airline organizations globally.