Shift To Direct Payments Gains Momentum As Airlines Challenge Legacy BSP Model To Reduce Costs

While airlines and agents don’t agree on everything, both are actively looking to adopt and implement direct payments solutions to bypass the BSP.

Airlines face delays in payments and high transaction fees with the legacy payment technology, according to Ann Cederhall, Travel Technology Specialist at LeapShift. She told Travel News in August that this played a large role in why airlines were looking towards NDC and direct transaction channels as a way to reduce distribution and transaction costs.

Monique Diez, who represents Thomalex South Africa, points out that additionally, airlines have to undergo a five-step BSP accreditation process which is as onerous a process as agents’ IATA licensing and guarantee.

Agencies too, have many reasons to want to bypass the BSP. Travel News recently reported that the abuse of ADMs was one of them.

However, Rachael Penaluna, MD of Sure Maritime Travel, explains that agents are moving away from the BSP due to the unaffordability of maintaining an IATA licence and guarantee, especially post-COVID.

“One of the biggest deterrents to the BSP for agents is the IATA guarantee because it is so expensive and it's not a set amount so the agency’s guarantee can rise. In order to have an IATA licence you have to fulfil so many criteria,” said Penaluna.

She added that ticketing via the BSP prolonged the settlement of the transaction with the airline and increased administrative responsibilities for the agency, as it acted as an additional intermediary to facilitate the transaction between the client and the airline.

“I think that the drive to relinquish the BSP is about having more control of your ticketing and your money as an agency,” said Penaluna.

IATA’s solution to make payment solutions between airlines and agents more affordable was the Easy Pay system and wallet. Penaluna explains that this system, which was only introduced post-COVID, likely to offer agencies a solution while they got back on their feet, enables more instant transactions with airlines.

‘It all boils down to money’

Whether it was airlines looking to implement NDC and direct payment systems via their own direct booking channels or APIs with GDSs and aggregators, or agencies wanting more efficient direct payment systems, it all boiled down to money, said Penaluna.

While the big international airlines from the Middle East, Europe and the US have made strides in implementing NDC and direct payment channels, not every airline is able to implement NDC. This was especially the case with African airlines with their smaller financial resources, lesser technical infrastructure and smaller markets which could not ensure the profitability of NDC, she said.

Diez confirms this, explaining that, for airlines, the onus is on them to have some form of payment infrastructure in place, be it BSP accreditation or other direct payment systems, when they establish connections with aggregators.

And agencies face another challenge.

A Travel News poll revealed that a third of agents felt that airlines were not receptive to establishing direct transaction channels.

Penaluna said this might be because of the size, experience and availability of resources of the agencies applying for IATA’s direct payment solutions or looking for access to GDSs or aggregators with direct payment solutions.

For example, she said it was often easier for a larger and more experienced agency, which had previously held an IATA licence and maintained a guarantee on the BSP, to be able to move over to the Easy Pay system, as they had already established a relationship with IATA and the airlines.

Said Penaluna: “There are ways to move towards more effective payments solutions with honesty and with transparency, and that to me is what is the most important thing when you're running a travel agency.”