Navigating Payment Challenges in Asia’s Airline Industry

Transcript

Reggie Weston:Good afternoon, everyone, and welcome to our fireside chat on navigating payment challenges in the Asia airline industry. I'm Reggie Weston. I represent 2C2P by Antom. We support businesses to design their payments and payment strategy for online payments. And one of our key verticals is supporting the airline and hospitality industry simply because of our technology partnerships with Global GS System. Hence my guest today, Ramanathan Thiagarajan from AirAsia MOVE. Rama, you wanna say a few words?

Ramanathan Thiagarajan:Yeah, thanks, Reggie. Good evening everyone. I'm Rama here. I mean, just very quick introduction about AirAsia MOVE. AirAsia MOVE is the distribution arm for B2C of AirAsia Group. We are the official app and web for airline. I mean, today, as everyone knows, we manage airline distribution to the customer, as well as we are an OTA. So we also manage OTA business with other airlines, as well as hotels and activities and all that.

Reggie Weston:All right, thank you. So moving on, Asia is one of the most diverse travel and payments methods in the world, and airlines operating across this region, payments journey has become much more than just accepting card. In our earlier session today, there was discussion about fragmentation in Asia, and payments is actually one of that. It sits in the center of giving passengers choices in terms of accepting credit cards, local payments, QR payments, or even bank transfer. And what customer expects from this journey, it's just so different from one market to the other. Now, behind every transaction, there is a complex ecosystem, a payment orchestration, a effects to fraud, settlement and distribution while all keeping the customer's journey seamless. And that's what we're here to explore today, how airlines can manage the complexity while making payments work harder for the business. And from improving cross-border economics to converting this conversion, enabling greater control and visibility. And most importantly, We are here to learn the perspective from Rama, who sits in this interesting intersection of finance, payments technology, and the travel ecosystem. Shall we begin?

Ramanathan Thiagarajan:Yeah.

Reggie Weston:Okay. Now, to set the scene, what are the biggest changes that you have seen the way passengers across Asia want to pay for their travel today?

Ramanathan Thiagarajan:Yeah, I mean, we saw in our platform over the last 2 to 3 years, right, especially after COVID, there's changes in the way customers pay. Especially we see our traditional cards, and now people start adopting a lot of local payment. We take Malaysia as an example, FPX, right? And we realize this especially with our partner in Thailand, PromptPay. We see the utilization of that is keep changing, right? Meaning the way of people pay. So we work with 2C2P to enable in PromptPay, right? Thank you. I think the adoption rate really improve and the conversion rate up. And we also see people start using app a lot in terms of payment, right? People want, as a customer, they don't want like go through few steps, they don't want to key in so much of information, 2 taps, they wanna get paid. And lastly, I think the last 2 years we saw a lot of adoption or people want to have flexibility in payment. Yeah. And we saw BNPL, Come into picture and installment. So that is among the things that are growing now in the market, that especially for travel, all of us, right? People like to travel a long range. We have an OTA, people add hotels and all. It's a bigger basket size and people want to have the flexibility to pay in installment to cover their payments. That's what we see at the moment.

Reggie Weston:Thanks for that. Earlier today, Airbus shared some interesting data on unserved routes, and route expansion is clearly one of the vital growth strategies for airlines. But once you commit to this new market, what are the operational challenges that begin? How do you strategically decide which payment methods to offer when entering a new market?

Ramanathan Thiagarajan:Yeah, this is something that always when there's a new route opening for an airline, but like for example, AirAsia MOVE dedicated to about 5 AOCs, right? I mean, we have different markets and all fly to different routes, a different country and region, and not all the markets we have that entity. Okay. We always try to get 2 to 3 payment options that cover the biggest size of wallet in the particular country. That's a particular focus for us to capture as much as market. Along the line, we also notice the cost to implement, right? Cost here, not about just that MDR or cost of payment. We are talking about cost of implementation, fraud cost, chargeback, the monitoring cost as well. And I think the part that we also look into it is the conversion. Sometimes a lot of business people comes to me, they said, oh, I want 5, 6 payment method. Are we really gonna convert the customer, right? After you offer 2, maybe I added another one more. Will that, I gonna increase my customer or just a switch of payment? Yeah. That's the kind of consideration usually we'll do in our side.

Reggie Weston:Okay. Earlier today, Ben from AirAsia X mentioned that AirAsia is the only airline that don't have their own web-based sales and it's done through AirAsia MOVE, right? And once you start offering more payment methods, the complexity behind the scenes increases quite significantly, especially when you are a one-stop payment platform for all of your AOCs, as you mentioned earlier. So now rises the question on how you maintain a seamless experience while managing different providers, payment methods, and markets.

Ramanathan Thiagarajan:See, why unique in AirAsia, we make it the distribution channel to B2C separately, because we look, we wanna give a proper experience, a huge wholesome experience to our customer, right? And we want making a kind of a profit center, right? That's where your mindset, change to service your customer. So in terms of payment, it's the biggest component for us because that's the last part of your customer journey, right? Once they click pay, I'm happy, I'm offered my ticket. Fail, the customer might not come back to you because there's a final frustration to the customer. See, managing payments is very complex at the back, right? Say customer don't see it, they're just looking at the front end. What we are working on it now is while the back end are so complicated sometimes to implement new payment method, We're trying to introduce the middle layer. The middle layer to allow us to play flexibility of payments based on country, based on options and all that. They say just like kind of imagine that it's like a drag and drop kind of thing. Right. So the middle layer will come in and they say, okay, I just wanna offer this kind of payment in Thailand. So I just make sure that things are easily played and don't very tech dependent. At the moment, I'm saying, if you wanna implement a new payment method, just take the payment method Indonesia, you will take a month or 2 months because the process is very long because it's very tech-driven, right? Say you need to have a strong— we are working on to have a strong back tech, but we're using middle layer to introduce or to play around the payment method. That's how we are doing it now.

Reggie Weston:Riding on that same thought, I'm gonna move on to scaling across multiple markets and payment providers, how critical it is for payment orchestration in payment orchestration, in maintaining payment success rates? And where do you see the gaps and challenges in the industry today that needs to achieve?

Ramanathan Thiagarajan:I think in terms of payment orchestration, this is one of the core components of our middle layer now we are talking about, right? So where it is, I think where it is important to see that this is a very good ROI product that everyone needs to introduce, especially airlines. This is how a lot of e-commerce players are looking on orchestration, where orchestration works if you fail. Example, to give you the most smart routing kind of functionality, right? Goes to the cheapest or most successful payment provider acquirer. At the same time, you also can see as a BCP example, sometimes you rely on one single player.

Reggie Weston:Right.

Ramanathan Thiagarajan:I'm just giving, you just take one single PSP provider. If they fail for a certain reason or down, So with orchestrator, you can route to that and you still secure a customer.

Reggie Weston:Right.

Ramanathan Thiagarajan:But ultimately the challenges is coming is to implement that and to have a proper scaling of orchestration is very important to get this right at the first time.

Reggie Weston:I definitely do not wanna be in your position. Let's talk about optimizing the economics of cross-border payments. It's a big topic in Asia right now. When an airline sells a ticket internationally, You're not just managing the cost of accepting payments, you're also managing the different currencies, the FX exposure, settlement, and ultimately your margins. We heard— we hear a lot of how thin the margins is for airlines today. How do you manage the economics of cross-border transaction end to end?

Ramanathan Thiagarajan:It is a very interesting question because I'm having 2 hats in AirAsia MOVE as having a payment tech role as well as the CFO role. When I look into the payments is entire P&L, right? I look at payments success rates as a P&L line item. Say in a common term, people see payment cost is just an MDR cost.

Reggie Weston:Yeah.

Ramanathan Thiagarajan:But it's beyond that.

Reggie Weston:Yes.

Ramanathan Thiagarajan:I think there's a bigger chunk we need to look at the FX part of it where example, right? I'll just give you an example. We have a customer in Korea pay in local currency. But my cost in RM.

Reggie Weston:Yes.

Ramanathan Thiagarajan:And it being converted to MYR to do a cross-border, converted to USD.

Reggie Weston:Yes.

Ramanathan Thiagarajan:To do a cross-border transfer. There's so many leakages there. And my supplier is an OTA, I sometimes I need to pay in Euro. There's 4 types of currency that we're looking today. See, it's very important to look in the entire payment acquiring strategy as well to save your cost. Not only MDR, you might save certain basis point in MDR, but You need to look into FX. That's why some of the things that you need to start looking on acquiring locally, right? Where you can acquire local, where you can avoid the FX cost at all, right? Technically, if business, if you have a very big business in other country, start looking acquiring locally. Success rate will improve, your cost will be more cheaper, right? Try to work on that. And also second part of it, look part on the where your cost sitting. Example, right? I'm just giving real-life example. We have our tech hub in India and we have a big market in India. So I told them, why not you collect in India and settle in India? Because I can use the money to pay our staff in India and I no need to transfer back the money in treasury to centralize and transfer back. There's so many transfer fee costs and all that involved. So you need to see payments entirely and also the important element is success rate. Each success rate gives you a revenue, right? So 1% success rate gives you upside of it. So please look into entire things when you wanna do your payment strategy.

Reggie Weston:And there's of course the regulatory requirements of all these transfers. Yes, correct. Key challenge for an airline, managing fraud. Let's talk about that a little bit. For an airline, a payment being declined just isn't about a failed transaction. It could be losing a booking potentially, or even loss of a customer and credibility. Now, how do you balance being aggressive enough on fraud and making sure genuine passengers are not declined?

Ramanathan Thiagarajan:Yep. See, I mean, fraud, right? I mean, fraud, we don't want, and every company wants zero fraud. And we wanna be wider and wider to block everyone as much as we can, right? That's how fraud department work. See, usually we need to really see that, need to understand the markets now. It's no be traditional market. Previously, like I seen people just block because you are not booking for your own name. Card with different name and the passenger is different name. But now people can book, a lot of people. I book for my parents. Parents book for kids. And they also, people book from a card issued in Singapore. You book a flight to London from US. It's possible, people travel everywhere, right? So we need to understand how the markets move, right? So I think people need to start moving to risk-based approach. Educate your fraud team. Put not only KPI on lower fraud level, you should also put KPI on the false positive and the conversion. So you need to put the 3 KPI together. to the fraud person as well as the business person. So they will work on the same, we change your fraud team as kind of a commercial-minded team, right? So you need to balance within the proper KPI. Say that's how we work. Now we try to change. I think I won't say we are out of the woods. I take longer time to educate my fraud team on this as well, right?

Reggie Weston:So earlier today, Captain mentioned, Captain Azhar mentioned that, you know, how we have to embrace AI. So in terms of managing your fraud, aside to what you have shared, Are you using any AI-based risk engine to manage your fraud?

Ramanathan Thiagarajan:Yeah, for now I wouldn't say we use fully.

Reggie Weston:Okay.

Ramanathan Thiagarajan:We started the journey and we are in the towards fully AI-based, right? We are a lot of people involved at the moment. There's a lot of manual kind of thing. So in terms of fraud, AI is required to really, especially to to retain your retaining customer, right? Rama is coming back to buy Malaysia Airlines ticket few times, you should know Rama is a very good boy, right? No need to go and block him again and all that. So AI should do that well to understand the pattern, right? So I think that's one. On top of that, usage of AI through payments is very crucial as well in terms of 3DS. I'm really looking on the 3DS, you know, I think— What is 3DS? Maybe a lot of people to analyze almost 10% to 15% of transaction failed because of tighter 3DS requirement. Say you can embrace AI. I think some of the thing that we are working with, one of the potential work stream that we started with 2C2P, that to look on dynamic 3DS using AI. Thank you. So you allow couple, you allow your customers not getting authentication every time. It's sometimes I feel like it's very agitated. Every time you ask me, you know, you think I'm a fraudster. You ask me to key in so many numbers. So we are trying to avoid that, right? But that requires a lot to convince your stakeholders, right? And also as a finance person for payments, the recon is really pain at the back end. From bookings to settlement and the refund. Sometimes because the payment, the fulfillment journey for airline is sometimes take a year. After 6 months, the person give a refund. I don't know whether I really collected back or not. Okay. Hey, we really look into the perspective of that, right? Usage of AI is very crucial payment perspective, these 3 aspects. I mean, I really embrace on finance as well for recon at the back office. It look very less sexiest to use AI, but that's where very important is no leakages as well.

Reggie Weston:Okay. Another key area in airlines payment journey is distribution. Airlines today don't just sell tickets, sell on their apps and websites. They have travel agents, OTAs, and other distribution partners, and NDC included, right? The most important part of this ecosystem, how does AirAsia manage these distribution channels? And what would be the ideal technology stack would look like for you in making this work?

Ramanathan Thiagarajan:Hey, Reggie, AirAsia MOVE perspective, we always manage B2C web and app.

Reggie Weston:Right.

Ramanathan Thiagarajan:Very B2C-centric, but we also have a B2B arm as our sister company, which we really work on the payment part as well, right? So I think it's 2 different dynamics, right? I mean, B2C, you have your own challenges, while B2B, we're looking more working on your credit risk mostly, whether you get paid, whether you got the cash advance, how you wanna do the reconciliation, refund requests, and whether you wanna take a deposit in advance and all that. There's a lot of work that we work with a lot of partners like GDS, SEPA, and all. We work together with them to have a proper kind of integration. Sure. So that is the challenges in terms of all this managing a B2C, B2B payment, right? On the people are working on finance perspective, I'm looking, can we get one single view?

Reggie Weston:Yes.

Ramanathan Thiagarajan:That's very important. I'm talking about even B2C, I got web and app. B2B, they got multiple. We got sometimes got system for just for small travel agent. We got some work with GDS, Sabre, and some line we have a different kind of distribution, right? Say, can we combine this? Ultimately, we should combine this as one view and easier for people to do, especially to get whether your cash is collected on time. Right. Whether there is a reconciliation done on time, whether there is a proper, no leakages done. The refund has been properly collected, the customer has paid. So that is ideal situation. I mean, I wish to, but hopefully we can work on that with AI and with the things to do this. But it's important to do this right.

Reggie Weston:Okay. Factoring time, I'm just gonna take one question. What's your ideal payment orchestration setup?

Ramanathan Thiagarajan:Oh, this is, I mean, ideal payment orchestration setup. to find a right payment orchestration partner to learn. I mean, ultimately you need to know, right? We are not like really a tech. An airline, we got multiple things to focus. There's a lot of provider that in the market, right? Like we also exploring with 2C2P as one of the orchestrator. Thank you. And we can also working with, we try to, there's other providers as well. We are trying to do, get the right partner that understand your mechanics of airlines. That's important, right? Because airlines are a bit different. So I think that's important. And to set up the orchestration at the initial stage is very crucial, end-to-end. I'm really looking from aspect of whether you got all the payment method in all the country. That's very important. They must connect it to all. And can they provide you real-time monitoring in terms of your failure rate, success rate, and all that? And also in terms of reconciliation, there's a painful always, right? Can they provide as a partner? Yeah. So there's always kind of aspect that we need to look to have an ideal payment orchestration setup. Get the things right at the first time. Don't after you're done, then you go figure out something after 2, 3 years. That's been always difficult.

Reggie Weston:So what I hear is not just working with a provider, not just providing payment channels, but it has to fill in all the other boxes that you have. You keep mentioning recon, and that's the hardest most challenging part in any airline management due to the multiple distribution channels. Yeah. Okay. That's a good point. Factoring in time, last question. I'm gonna have a rapid closing. The one thing you would remove from today's payment journey?

Ramanathan Thiagarajan:I will remove multiple blockage because of fraud as well as because of the authentication. Remove that to, especially for the retaining customer, a very, very good experience. They're very happy.

Reggie Weston:The one payment or tech trend that you think airlines need to pay more attention to?

Ramanathan Thiagarajan:I mean, I see 2 parts, right? One is cross-border payment acceptance. Like, for example, if we say Alipay now, you can pay anywhere using Alipay, right?

Reggie Weston:Right.

Ramanathan Thiagarajan:So I think I'm, as a customer in Malaysia, I wish to pay non-card payment in other countries. So I think that is growing, that we need that more because that's where we can allow choices of customers comes in. And I think in future there is account-to-account payments. We will see that is also we need, but it take a longer time. But I think that's how some of the markets are moving as well.

Reggie Weston:All right, thank you very much, Rama, for your insights and keeping it real and perspective. And I'll pass the stage to Willy. Thank you very much.

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