PayTalk What's New, What’s Next

Transcript

Rich Maslen:Good afternoon, everyone. Yeah, it's me again. Welcome to what promises to be a fascinating and very timely conversation we have now about airline payments, one of the fastest evolving and most strategically important parts of our industry today. Payments used to be seen as a back-office plumbing. But that's changed dramatically. Airlines are now recognizing that payments are not just a cost center, but a competitive differentiator. How you let consumers pay and how efficiently you collect and manage that money has huge implications for loyalty, ancillary revenue, global reach, fraud protection, and overall customer experience. As new payment technologies, regulatory shifts, and changing customer expectations converge, airlines are under pressure now to innovate more than ever. and at the same time keep things safe, scalable, and secure. So who better to help us navigate what's new and what's next in this sector than 2 senior leaders from UATP, a company that's been at the center of airline payment innovation for decades? Please welcome Wendy Ward, Chief Marketing Officer at UATP, and Michael Marrone, UATP's Chief Financial Officer. Thank you for joining me.

Wendy Ward:Thank you.

Rich Maslen:Right, Wendy, let's just start with you. When you speak to airline partners today, what are their biggest concerns or ambitions about airline— about payments, and how has the tone of those conversations changed over the last couple of years?

Wendy Ward:Yeah, thank you again for having us. You know, it's interesting because several years ago we probably would not have been sitting on this stage. When airlines would think about the cost of payments, they were like, oh, that's just something that we have to do, you We take payments, we're going to pay whatever we need to accept them. And now what we're seeing is people are actually looking at payment strategy. And the last 2 sessions have nailed it on the head. It's the Gen Z, but it's also customer experience because it's not just a cost anymore. So of course cost is an influencer, it always will be, but you need to have, as you stated, the end-to-end. What are the offerings? You know, is payment gonna be— is there card abandonment? These are all issues that people are talking to us about. But I also think something very interesting in this region as well, you know, what forms of payment are accepted? You know, it used to be credit cards, and I hate to say it, but checks and cash. And now just look at where we're sitting in Singapore, in Southeast Asia. There's hundreds of forms of payment here. in digital wallets, and you have to understand which one do I need to accept? What's gonna be best? What's gonna influence Gen Z? Is it the Wagyu beef or is it gonna be able to pay with the form of payment they want to? So these are all conversations that are intrinsic with our airline partners today.

Rich Maslen:So Michael, from, from your perspective, how has the financial dynamics of airline payments evolved post-pandemic? Are we seeing different pressures or opportunities for airlines today?

Michael Marrone:Yeah, I think it was great to hear the CEO of Thai Airlines, and I think one of the common themes that we've heard today is really cost control. And when it comes to payment, there has been more of a tendency to look at payment cost and try to get that under control, because as he said, you don't have as much control on revenue, but when it comes to cost, you do have the ability to control your cost. And payment is something that you can control. So there's that aspect of it, but there's also other aspects of payment that you can't ignore. You know, there's the fraud aspect of payment that we need to look at and consider. There's the regulatory landscape that we all need to think about and consider as we're global companies operating in a lot of different markets. The regulatory landscape is dynamic and forever changing. So those are certainly some pressures for airlines to consider. But then again, I think the other theme that I'm taking away from today is really the customer journey. And I saw, you know, the last presentation had all the boxes of the customer journey, and I think payment needs to be one of those boxes in there additionally, because that customer wants to pay and they want the end-to-end experience from the booking to the return of the travel. They want to have all of those experiences and in addition, having their payment form lodged into whatever they need to do to affect that trip. So a lot of great things to consider. So yeah, it's definitely getting a lot of play here.

Wendy Ward:Well, and I think everybody here, raise your hand if you bought tickets with a credit card or was it a digital wallet? Digital wallet, right? So I think that goes to show too, Mike was saying, the customer experience and the form of payment is crucial now.

Rich Maslen:So, you know, talking about that with these alternative forms of payment, with crypto as well, you've got real-time payments, wallets, you've got, you know, split payments now and things like that, buy now, pay later. You know, they're gaining traction more in different marketplaces. You know, what role do you see these in aviation moving forward, or are they going to be always at the side as an option but not any— not part of the core Core transactions.

Wendy Ward:Oh, I think it's core now. And it depends on where you are too. Like I was saying, geographically, it also influences. So you've got things like Latin America where if you don't have installment payments, the boleto in Brazil, you're losing out on clients. Take, for instance, the Netherlands. You have to have iDEAL. Anywhere in Europe, a very mature marketplace, it's something that you have to look at as well. Because not only the regulation, but they're coming along with digital wallets. And then Southeast Asia, it's— everything here is digital. And Latin America also, you know, as the gentleman before was speaking about, it's a younger marketplace. So Gen Z, you've got to look at how do they want to pay, and they're influencing it, and probably have never had a credit card or a traditional bank account. So everything's on their phone.

Rich Maslen:But I think when it comes to payments, you know, there's always this concern about fraud. So Michael, fraud obviously remains a huge issue in the payment space. How are airlines doing when it comes to actually balancing seamless payments with security and compliance?

Michael Marrone:I think we're doing well. And I say we because UATP is owned by 35 or so airlines, so we consider ourselves you guys as well. So I use the term we. I hope that's okay with you, even though we're not technically an airline. However, when it comes to fraud, I think the airlines are doing a fantastic job. I just recently signed up for a frequent flyer account for a European airline, and the process of just creating that account was quite complicated, and all the controls behind making sure you are who you are with 2-factor authentication and things of the sort. So, but it is a balancing act, and, you know, Fraud, I think I just recently read it's a $15 billion industry. So that's basically the size of one global network carrier's revenue just disappearing. $15 billion, it's massive. So I think the industry's doing a very good job. It's really hard. Fraudsters exist to defraud. So, you know, we always have to stay vigilant and stay top of mind, especially when it comes to payment, because I think that The payment is where most of the fraud actually occurs.

Rich Maslen:Michael, is AI changing the game in terms of detection and prevention of fraud?

Michael Marrone:I don't know that AI is changing the game. I think it's enhancing the game. And then I guess it depends on whose perspective are you looking at.

Wendy Ward:From—

Michael Marrone:if I'm a fraudster, I might think that AI is very helpful for me. You know, you have synthetic identity, All types of different ways that a fraudster can defraud an airline. But the airlines are combating, and I think there's a lot more fraud prevention with AI pre-booking, whereas I think the current fraudulent tools occur post-booking and at the payment. But AI is assisting airlines with detecting fraud before the booking actually takes place. place so it just kicks the fraudster out before he even gets a chance to get in. So I, I think there's a lot more to come on AI. I think we're just scratching the surface. There's a lot of investment in AI over the last several years, obviously. So it'll be interesting to see if it goes from a game enhancer to a game changer. But again, I just think to myself, who's it changing the game for? Is it changing the game for the fraudsters or for those of us that are trying to prevent the fraud?

Wendy Ward:And as good as your tools get, the fraudsters always seem to be just as good, if not better. So, you know, we joke things like our— next year's our 90th anniversary. Our 90-year-old closed-loop payment network is one of the most secure payment networks in the world with less than what, 0.1% fraud?

Michael Marrone:0.001%. Yeah, it is funny.

Wendy Ward:So note to yourself, everybody.

Rich Maslen:I think obviously if you were here earlier on, you saw that I gave Oliver a chance to have a quick plug of his business, and I think it's rude of me to have you on the stage and not actually talk about what UATP is doing. So I'm going to give you, like I gave him, 90 seconds. You can choose which one of you wants to, wants to do this little pitch.

Wendy Ward:Yeah, you're going to do rock-paper-scissors?

Rich Maslen:So this session is called What's New. So what's new and what's the most exciting payment developments UATP has rolled out recently?

Michael Marrone:I'll give the 90-second elevator pitch and then I'll kick it over to Wendy to talk about what's new. But I mentioned earlier, we're a 90-year-old payment network founded by American Airlines, but we've evolved over the last 90 years. You can think of us like a Visa or MasterCard. We're a closed— but we're a closed-loop payment network. And instead of banks issuing UATP accounts, Airlines are actually the issuers of these accounts, and they issue them to corporate subscribers, and the corporate subscriber can use their UATP account to buy airfare on over 300 airlines globally. So that's our main line of business. And then over the last almost 20 years now, we have enabled alternative forms of payment to plug into UATP. And then that way, an airline who's already plugged into UATP can have access to that alternative form of payment, a buy now pay later, a PayPal, digital wallets. So an airline can pick and choose which alternative forms of payment they need to service their customers. So instead of the airline having to plug into all of them separately, they plug into us and they have whichever payment types they need. Those are the 2 things that we've been doing over the last 90 years. We've just recently opened a new line of business I'll kick that over to Wendy to talk about what's new.

Wendy Ward:Okay, so we do actually have several things that are new. The new line of business that Michael was just referencing is called UATP One. It's merchant services. So as a payment network, we never really thought that we would be processing other forms of payment, our competitors, but we do. It's been very, very successful. We did a soft launch, what, just over 2 years ago, and we've got close to 25 airlines already working with us. working with us. So that has been wildly successful. We've rolled out virtual credit card just recently, and, you know, it tickles me again because UATP is traditionally 95% lodged accounts, so we're already virtual, but we built a whole other virtual credit card for that intermediary space. So that relationship between the airlines and the OTAs, the payouts, is what we've been doing. We announced about 2 weeks ago, CPOI, Card Present Over Internet, with our partner Burbank. It's a tap and pay. It's basically your own POS system. Really innovative that, you know, literally just announced. So if anybody wants to be a pilot customer, come see us later. And then the reason outside of CAPA that we're here this week, we spent the first 3 days of this week here in Singapore meeting with airlines from all over the world. We have just rolled out, and our colleague, Rupudaman, here from India, it's an intra-India settlement solution. So we are actually able to process Indian rupee. And Mike, I'll let you speak a little bit more to that, but this is brand new. We put out a press release this morning. We've got a partner in India. And it's just exciting because it was a challenge. I will say that. And I haven't even been on the project team the whole time. But we're very, very excited to be able to have intra-India settlement because we're the first to be able to do that.

Rich Maslen:Well, that's some really, really good news to hear and well done for getting that forward and over the line. I think you've had enough about UATP now. Let's get back to the industry and the trends. So there's a lot of talk about payment data being underutilized and the value of this information that you have. What's the opportunities for airlines to turn payment data into actual commercial insight? Wendy, do you want to?

Wendy Ward:Sure. So I, I think one of the things, you know, and Mike and I have talked about this, you've heard it throughout the day too, that data is key. So if you know who your clients, where are they flying, you know, in our particular space in corporate travel, you know, CFOs look at what are the city pairs. Can you use those city pairs that you fly most often? And I'm— I know all the airlines here do this, but you give special rates. So if you fly Singapore to Mumbai 10 times a month, more than likely you're going to get a good corporate rate. And that's all about having the data. But it's also, you know, how do you get more intrinsic into it, especially with payment? The newer thing is multi-acquirer strategies as well. So there's airlines out there that have whole teams that just look at where's my form of payment going, how much is it costing me here on my acquirer, Do I route it? You know, this term smart routing. Do I go to a different processor on this, different acquirer? And we've seen it, and they are instantaneously looking at this. So that is full data analysis for revenue and cost savings.

Rich Maslen:And you talk about cost, Michael, from a CFO's point of view, where are the hidden or rising costs in the payment ecosystem that airlines should be paying the closest attention to?

Michael Marrone:So when you look at the merchant service fee on a credit card transaction, when you peel that onion back and see how many hands are in that pot taking cost from the merchant, it's incredible. You have the acquirers, you have the networks, you have the banks. So there's a lot of opportunity to peel that back and reduce cost in that somehow, negotiate.

Rich Maslen:Yeah.

Michael Marrone:With your acquirers. I think Wendy just mentioned multi-acquiring, you know, having an acquirer in different regions to lower those costs. So there's a lot of hidden costs in the merchant rate. There's a lot of hidden costs in foreign exchange. The banks obviously have their hands in the pot when it comes to FX. So they're taking some margin there, perhaps not even giving the best rates available. available for that day if you're doing spot transactions and things of the sort. There's hidden costs in obviously chargebacks, fraud-causing chargebacks, the cost to process a chargeback. And then I think another one to think about also is maybe not so much a cost, but an opportunity cost of working capital. So if you're not settling with your acquirers on a timely basis in a high-rate interest environment like like we are in today, there's the opportunity cost of not having that cash in hand sooner than you could otherwise have it. You know, we talked about, you know, investment in capital, but without the cash on hand because you're losing some float, it does make it a little bit more complicated. So I think there's a plethora more, but I think those are probably the ones that we should be focusing on first.

Wendy Ward:And if I may add too, Truly, as Michael was going through all these, the cost of payment is massive. You know, you're looking at hundreds of millions of dollars a year to accept payment. And when you put it in perspective that it's actually now costing more than a GDS, everybody thought the GDSs were more expensive, but the cost of payment actually is. So it's something that you truly have to look at and understand with all of your providers.

Michael Marrone:I think it's 2 to 3% of revenue is the cost of payment. So not insignificant, right?

Rich Maslen:That's a big, big, big cost ultimately. Now, you two don't know this, so it's going to be a bit of a shock to you here, but I'm— I've always thought it's quite interesting and you've got a marketing professional and a finance professional on stage from the same company, but have got very different mindsets of what they want to achieve within business. So I just thought it'd be quite nice to actually see how that works and whether It's a bit of a balancing act between building a payment system that's beautiful, seamless, customer-friendly, that Wendy wants. Also secure, cost-efficient, and commercially viable, which Michael wants. So Wendy, when you're pushing for the next big thing in customer experience, how do you keep that from clashing from Michael's budgets and cutting the money from your spend?

Wendy Ward:I don't tell him. Fortunately, we've worked together for what, like 12 years now? Something like that.

Michael Marrone:There's a great trust factor going on here.

Wendy Ward:But I do honestly believe too, you know, we're a company that we also believe in fail fast. So things that we look at when I'm looking at from customer journey and pain points, you know, all of our clients, all the airlines that we talk to about this, is there something that's gonna be more sticky? Is it gonna be something that generates revenue immediately from my side? Maybe not. But what I'm looking at is the long game. Is this something that we're adding to a product base, to the payment structure, that will inevitably bring more clients in and get more revenue for the airlines in a longer play? And, you know, some things we've looked at, thankfully we failed fast and we moved right on. And yeah.

Rich Maslen:Michael, do you believe her when she puts these things and pitches them to you for their longer-term success?

Michael Marrone:It's a great question because now it's budget season.

Wendy Ward:Yeah.

Michael Marrone:So every year Wendy submits her marketing budget and the first thing I say is denied. And so, but then, you know, we talk and she obviously wins all the time. But look, I think the CFO seat operates different now than it did 15, 20 years ago. And I think CFOs do think a little bit more strategically when it comes to certain types of spend, particularly marketing. When I think of UATP and where we've been over the last— since I've been with the organization for 12 years, our customer base has increased x-fold, our revenue has increased y-fold. You know, you can't go to any airline event without seeing the UATP logo out. I think it's been great to see that. And so when I think about ROI from marketing spend, it's not something that I know I'm going to say, hey Wendy, well, what are you giving me for this X million dollars next year? And she's like, wait and see. So it is a long game, and I think someone mentioned on a panel earlier, it's smart investing, and I think that's the way we look at marketing here at UATP.

Rich Maslen:So just, just finally, the panel was called What's Now, What's Next. We've got about 10 seconds to, to look at what's next. So apart from Wendy's promises coming to fruition. In 2 years' time, if we were sat on this stage again, what would be the big thing that's happening with UATP, do you believe, and what will be happening in payments?

Wendy Ward:I think UATP One, the merchant services side, you know, we've seen even earlier today, you know, that the real need on the tech stack, and now they're calling it the payment stack, you know, it's true. So I think across the entire industry, A payment stack is going to be intrinsic, and we're completely reinvesting all the time in it. I think India is going to be something to watch. It's going to be very, very successful for us. And yeah, Mike and I on more stages.

Michael Marrone:Hopefully she gets me out of the house. But I think in 2 years, I'm going to say we're going to keep doing the things that have made us successful over the last 90. Helping airlines reduce their cost of payment. Wendy mentioned card present over internet. That's a great breakthrough. It's a fraud control as well as a different way to pay. Our virtual card program, which we do it cheaper than other virtual cards, I think we'll see more of that coming. AI, I think, is something else that's on the forefront here. So we're going to keep looking at that and see how that can integrate with the things we're doing at UATP. So a lot of fun things to have. I hope you will have us back in 2 years.

Wendy Ward:And the payment industry in this group, I think the knowledge base is going to be much, much smarter.

Rich Maslen:I think we can see that sort of payments is not just a utility, but they're, you know, a source for competitive advantage, and it's something that everyone should be looking at as an option moving forward to stay ahead in the future. So thank you, Wendy, Michael, for your expertise and insights there, and for embracing my, my little bit of of fun there. I think you handled it really well. Please, appreciation for, for, for the 2 of them from UATP. Thank you.

Wendy Ward:Thank you. Thank you.

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