A glitch at the Federal Aviation Administration (FAA) sparked chaos in the airline sector this month.
And in an interview with PYMNTS, Kristian Gjerding, CEO of CellPoint Digital, said the swirling headlines and the aftermath underscore a few truths in the travel industry:
Running an airline is a complex, difficult business. And payments orchestration can help cement customer loyalty in times of strife — and smooth flying too.
As had been widely reported in the wake of the FAA outage that grounded flights throughout the U.S. for the better part of the day, each airline was and has been tasked with deciding when/whether to compensate passengers for the flights. Those issues are still being ironed out.
Conventional wisdom might hold that airlines are rife with inefficiencies. Nonetheless, as Gjerding noted, by and large, the carriers are handling a surge in demand quite well as economies reopen.
“The industry got hurt, big time,” he said, “but it’s coming back. We’re seeing traffic numbers growing really quickly — and we’ll exceed 2019 by the end of this year, and business travel, too, has been coming back, slowly.”
But technology has not kept pace, and friction has been in the mix, especially as airlines have had to do more with less, as demand surges and as staffing rosters may be lighter than they were headed into the pandemic. One area where airlines can pivot toward upgrading their operations, engaging with travelers more successfully and boosting their margins lies with payments orchestration.
At a high level, payments orchestration brings multiple parties into a platform setting — payment providers, acquirers, and banks — to help increase conversions, route payments and improve security.
“The whole purpose of orchestration,” he said, “is to build resiliency and redundancy and to simplify these operations for the airlines.” Orchestration, he said, touches the entire journey, from when the traveler begins the payments part of the booking to when the back office reconciles funds to generate cash flow for the airline.
Orchestration, said Gjerding, also enables the carriers to service customers with a broad range of payment types — from cards to digital wallets and beyond. Offering that broad swath of payments optionality is a critical factor that will likely enable and incentivize passengers to buy tickets.
Gjerding noted that other verticals are embracing orchestration, and middle market companies are enjoying the benefits of increased conversion rates, especially with cross-border transactions. By automating a significant number of back-office functions, they can do more with the resources they have on hand, and do not have to build up payments or accounting and reconciliation staff to handle payments.
Payments orchestration, he said, also helps companies avoid the pain points of the “soft decline,” where transactions might be denied because of false positives (and not because of lack of funds) or even technical failures.
Those benefits carry over to airlines, he said.
“Ultimately,” he told PYMNTS, “it’s the core airline product and price, and services, that help you decide whether you’re going to buy the ticket or not.” A decline — if not tied to non-sufficient funds — can put the entire traveler/airline relationship at risk, noted Gjerding.
Looking ahead, he said, airlines are likely to continue to pivot toward orchestration, particularly amid choppy macro headwinds. He told PYMNTS that payments orchestration across CellPoint Digital’s platform Velocity can generate an 11% return on “flow.” In other words, the firm that brings a hypothetical $100 million of transaction volume on the platform will see $11 million delivered to the bottom line in terms of efficiency gains and increased conversions.
“Simplifying these processes makes for happier passengers,” he said of the airlines, “and turns a cost into a profit.”
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