International Air Transport Association (IATA)

The International Air Transport Association (IATA) — a prominent player in the airline industry, representing 83 percent of total air traffic¹ — faced a pressing challenge: the rising costs of payments for the industry, amounting to US$20.3 billion globally.

Airlines typically assume commission and collection costs through traditional payment methods, resulting in substantial expenses in high-volume businesses like the airline industry. These mounting expenses compelled IATA to prioritize cost reduction initiatives and seek alternative payment methods to streamline their approach and cut down on expenses.

To address this challenge, IATA needed to develop a cost-efficient payment solution that would revolutionize how airline customers make transactions. The objective was to provide airlines with a more efficient and cost-effective payment option compared to traditional credit-card transactions.

To address the cost challenge, IATA worked with KPMG in Spain to develop IATA Pay, an innovative digital payment method that allows airlines to offer a business-to-consumer model to their customers through online sales channels, leveraging open banking principles and instant bank transfers. A pilot study and a business case were conducted to help validate the feasibility of the digital payment solution, leading to a clear strategy for its global deployment.

The delivery of IATA Pay included leveraging KPMG in Spain’s expertise in digital payments, regulatory knowledge (such as Payment Services Directive Two and open banking) and technologies like application programming interfaces and the AWS cloud platform. KPMG in Spain was involved from the initial feasibility analysis phase, prototype design and business case estimation to the global rollout and associated managed services for IATA Pay.

The IATA Pay rollout is still ongoing to ensure global coverage, with a presence in more than 28 markets, 20 airlines are live and a further 25 airlines are working on their integration. So far, IATA Pay has produced significant outcomes:

• Cost savings: The adoption of IATA Pay resulted in cost reductions up to 98 percent on airlines payment processing fees.
• Enhanced security and fraud reduction: IATA Pay’s instant payment feature has helped ensure a more secure and fraud-resistant transaction process. Tickets are released only upon payment receipt within the same transaction, reducing the possibility of fraud compared to traditional credit-card transactions.
• Better customer experiences: IATA Pay offered customers more choice and flexibility when making ticket purchases, with the option of instant account-to-account bank transfers. This facilitated faster and more secure payment transactions, enhancing the overall ticket purchasing process.
• Improved financial security: Reduced reliance on credit card transactions enhanced financial security for airlines, eliminating risks associated with chargebacks and providing a lower cost per transaction.

The successful design, development and global deployment of IATA Pay reflect a collaborative effort to reshape the digital payment landscape in the airline industry and were specially commended for industry-wide digital transformation at the 2023 EuroFinance Treasury Awards for Excellence². By leveraging open banking principles, instant bank transfers and cloud technologies, IATA achieved significant cost savings and enhanced the payment experience for customers.