Eamonn O’Shea, chief executive of Continuum, says the technology is available so travellers do not have to worry about foreign exchange rates when booking airline tickets
Guest Post: Innovation in financial services can benefit airline margins and customer experience
It’s no secret that airlines around the world are operating on extremely tight margins.
So tight in fact that according to a pre-COVID 19 pandemic Iata Economics report profit per airline passenger is not enough to buy a Big Mac in Switzerland. And that’s without the fries.
So, airlines are continuously looking to grow revenue, while improving the customer experience and we are seeing this happen with a raft of interline partnerships and ancillary product offers from carriers across the globe.
The issue for many travellers however is not deciding which meal to have on the flight or which tour to book when they arrive at their destination, but rather how much it’s actually costing when prices are only displayed in a foreign currency.
Airlines will typically show fares in the currency of the country of departure but this is not always the currency of the customer’s card or preferred payment method.
So, travelling around Europe, for example, can be a real headache for a US citizen as there are multiple currencies to navigate and seldom an up-to-date exchange rate price transparency at the point of purchase.
Out comes the Xe.com app followed by searches for the appropriate exchange rates and then the inevitable rounding up or down to get an approximate price in the customer’s home currency. It’s not seamless, it’s rarely accurate and it’s not a good experience.
Consumers want simplicity and transparency or they are likely to abandon a purchase; they are 20% more likely to convert if they can pay in their preferred currency using their preferred payment method.
Average transaction values are also likely to increase, by around 8%. The competitive opportunity for airlines that offer travellers the ability to pay in their preferred currency and payment method, at a granular, country level, is significant.
Then there’s the airline’s margins to consider. Multi-currency services allow airline customers to pay in their preferred currency and their preferred payment method.
So, our US traveller flying into Europe can not only pay for a flight from Denmark to Sweden in US Dollars, he or she can also pay for this flight with their preferred payment method.
Innovation in financial services and digital technology are combining to deliver new ways that make it easier to buy airline products.
By offering multi-currency pricing, airlines can open up an additional ancillary revenue stream without increasing prices.
Revenue is earned on the FX margin on the rate of exchange which would otherwise be taken by the customer’s card issuing bank (usually between 3% and 5%).
The airline offers the product, recruits the customer, absorbs the various payment fees, and takes the credit risk, so is it not right and fitting that they should be the ones to benefit from FX exchange rate gains?
Improving the customer experience and making it more transparent by offering local payment and currency options has for a long time been an issue in the airline industry.
Now with a choice of new payment solutions available, this is no longer the case and both consumers and the airline are set to benefit.
Airlines can tap into this lucrative source of new revenue and increase customer conversion rates, while travellers can put away their Xe.com app as foreign exchange rates become one less thing to worry about.