By Akif Khan, chief commercial officer of Bitnet
It comes as no surprise that airlines and travel companies are constantly looking for ways to lower their costs. By accepting payments in the digital currency bitcoin, an increasing number of online travel merchants and airlines are achieving just that.
Most people are unaware of the costs associated with accepting card payments online, airlines often face even higher fees from acquiring banks for card processing.
Many airlines will be taking cross-border transactions with a consumer in one country booking a flight with an airline based in another country, such transactions typically attract even higher fees from the card schemes.
Another problem airlines face is card fraud. A recent CyberSource report showed that airlines lost 1.1% of their online revenue to card fraud, airlines reject an additional 3.4% of online bookings purely on suspicion of them being fraudulent.
Of course some of these transactions will be fraudulent, but others are good customers mistakenly rejected who consequently won’t return to that airline’s website.
So how could adding bitcoin as an online payment option help to solve these problems?
Firstly, it is typically cheaper than accepting a payment by card as the processing costs are a lot lower, airlines and online travel merchants therefore lose less in fees and boost their profit margin.
Secondly, cross-border friction disappears, bitcoin is borderless and allows a payment from anyone, anywhere – this enables airlines and online travel merchants to easily sell to consumers globally.
Over and above these benefits, we’ve noticed that it’s the mitigation of fraud risk that gets airlines the most excited, as there is no chargeback mechanism and all consumer payments are final.
Eliminating the risk of fraud will also mean that airlines and online travel merchants can accept business that they may have refused before.
Of course it could be fraud but then again it could be valid business. If that customer was paying with bitcoin, the merchant could take the order with confidence.
Finally, much of the world’s population, especially in emerging markets, still don’t have credit or even debit cards.
For domestic low-cost airlines operating in such markets, how do they sell tickets? There is a heavy reliance on travel agents selling face-to-face within the local population.
However, if those local customers had access to bitcoin via their smartphones, they would then be able to purchase their tickets online.
So, given these benefits, why aren’t more airlines today accepting bitcoin? The global travel industry runs on legacy infrastructure that was only ever designed to handle card or cash payments.
Adding new payment types is often a problem for airlines in having to consider the downstream impact to all these players in the ecosystem of accepting a non-card payment. The costs often outweighs the benefits.
To reduce the complexity for airlines to accept bitcoin payments, we’ve partnered with Universal Air Travel Plan (UATP). Over 260 airlines accept UATP payments.
As a result of our partnership, an airline will be able to integrate with Bitnet to accept consumer payments in bitcoin and behind the scenes we’ll work seamlessly with UATP to make the transaction look like a normal UATP transaction.
The partnership with UATP contributes to a simpler and cheaper implementation process for airlines, which will hopefully encourage more airlines to offer the cryptocurrency as a payment option.
In many markets, particularly emerging markets, travel represents a large share of e-commerce. Airlines and online travel agencies are often at the forefront of online innovation in such markets.
Could this have a knock-on effect for Bitcoin acceptance online? Just maybe.