PSD2 enables alternative to card payments for airlines

flight booking payment

In one of the clearest examples yet of PSD2 enabling new services that could replace card transactions, Deutsche Bank has announced details of a “game-changing” payments solution for airlines.

The German bank has embarked on a project with the International Air Transport Association (IATA) to test out the new model, which would allow airlines to collect customer payments directly from individuals’ accounts. Currently, most payments between airlines and their customers are via credit and debit card.

This new, PSD2-enabled system could reduce payment processing costs for airlines and also accelerate the availability of funds, with direct transactions being completed in near-real time.

Security could also be improved, with two-factor authentication being put in place to maximize fraud protection.

According to Deutsche Bank, this new solution could deliver a significant reduction in the estimated US$8 billion annual cost IATA members incur as a result of card payment processing and fraudulent activity.

The company also noted that airline passengers will benefit from a simplified payment process and “ultimately more convenience when paying for airline travel”.

Shahrokh Moinian, global head of cash products at Deutsche Bank, said this new project with IATA is representative of the Frankfurt-based institution’s “desire to transform regulatory initiatives into opportunities for our major clients involved in the B2C industries”, as well as its commitment to innovation.

Javier Orejas, head of banking for the Americas and EMEA regions at IATA, commented: “The direct payment model promises significant cost savings and efficiency gains for our members. With airlines paying huge amounts for transaction fees and compliance – in addition to losses sustained due to fraud – this is a highly valuable innovation for the industry.”

If this project proves a success for the airline sector, it could be the first in a series of new solutions and services enabled by PSD2 that provide alternatives to credit and debit card transactions.

 

Image credit: scyther5 via iStock

Written by Jack Dougal

Jack Dougal

Jack Dougal is Banking.com's resident news reporter. He writes regular blogs covering the latest stories and key developments in the global financial services industry.

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