Business

Emirates attacks the airline industry on credit card rights

Loading...

Emirates is charging a fee from airlines to avoid the heavy processing costs of payments redeemed by the credit card industry, after the carrier became the first to adopt a rival system developed by Deutsche Bank.

Dubai-based carrier has implemented a delayed scheme for real-time electronic payments for tickets devised by the German provider on behalf of the International Air Transport Association, the commercial organ of the airline industry.

The scheme allows real-time payments from customers who book tickets on the Emirates website, with the money transferred directly to the carrier without the involvement of third parties.

The goal for Emirates and other airlines is that customers choose to use rather than pay with credit cards like Visa and Mastercard.

Emirates has not disclosed the portion of payments it hopes to deal with via the new system. Between 60 and 70 percent of all tickets sold by the Middle Eastern carrier are paid by credit card, while the rest are released through country-specific payment options.

Airlines should pay credit card companies between 1 and 3 percent of the ticket price, with larger carriers closer to the lower end of that range, according to industry leaders. In contrast, the system adopted by Emirates known as Iata Pay imposes a fixed fee of only a few cents per transaction, regardless of the ticket price.

“For us, this is a big difference,” Emirates chief financial officer Michael Doersam told the Financial Times, adding that entitlements to payment providers were one of the biggest components of their selling cost.

Iata estimates that prior to the pandemic, airlines around the world spent $ 8 billion a year on processing payments to credit card companies and other external payment service providers.

For Deutsche Bank, Iata Pay is “a key strategic project,” according to Christof Hofmann, the world’s head of banking for payment and enterprise solutions.

Loading...

The German lender, which two years ago promised to lower its reliance on volatile returns from bank investment, has identified payment processing as one of its growth markets. Stefan Hoops, head of Deutsche’s corporate bank, said the FT last year which had the “highest strategic priority”.

The bank announced last month a joint venture with US fintech Fiserv to offer electronic payment services to small and medium-sized businesses in Germany. Other airlines are in discussions about the use of the new scheme, according to Deutsche.

Emirates called the new payment system “Emirates Pay”, and Doersam said “we have already seen the first transactions with Emirates Pay and we are very satisfied”.

The carrier may eventually offer incentives to customers to use – for example, a larger baggage allowance, a free upgrade to seats with more legroom, or even special rates that can only be booked with Emirates Pay.

However, Iata Pay has suffered significant delays. The airline industry body hired Deutsche in early 2018 with the goal of launching it by the end of that year. However, issues related to the European regulations on open bank banking and the pandemic have contributed to the delay.

“Now is the right time to launch it,” Hofmann insisted, pointing to the gradual resumption of air traffic and the easing of pandemic travel restrictions.

Iata told the FT that she was “happy” to “offer this white label solution to airlines” but declined to comment further.


Source link

Loading...

Read More

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button