12 Jan 2009
AirCore news Q4 2008
Credit card fees are a significant cost factor for the airlines. But with the increasing visibility of card charges, specifically for low cost airlines’ invoices that use on-line booking systems, an alternative low cost fixed transaction fee might be a very attractive alternative. The integration of
loyalty and payments under full control of the individual airline rather than by a traditional card issuer would reduce the cost for both airlines and their customers.
This article highlights the impact of the PayFair scheme in the context of SEPA Single European Payments Area. The SEPA program will change the payment industry in Europe by standardizing payment formats and messages, business processes and, not the least, legislation. The European
credit transfer has been in operation since January 2008, and a definitive common process for the European Direct Debit is expected before end-2009. Regarding card payments, change is also in the pipeline based on the SEPA Cards Framework, even if some points still need some clarification. One possible outcome of SEPA for cards is that domestic debit card schemes would not be upgraded to the new European standard but would migrate to international schemes like Maestro (MasterCard) or V-Pay (Visa), whose credit cards are already dominating the payment market. This outcome would be welcomed by banks as it offers them substantial revenues.
However, this would not favour merchants, airlines or consumers who eventually will be charged with these payments costs. This is the reason why Jan Molema, treasurer and head of IKEA’s card program is asking: “Where’s the Ryanair of the payment sector?” (Controllers Magazine, March, 2007).
In this context of potential duopoly, with high risk for merchants who face a huge increase in the rate per transaction, PayFair is a new and innovative European initiative that is merchant- oriented and uses the new possibilities offered by the Payment Services Directive (PSD). Most significant points of the new PayFair scheme are:
• Issuance by merchants (including airlines) but also by banks (decoupled debit)
• Open governance (including merchants and banks)
• Transparent pricing with fixed and low rate per transaction costs
• Potential for off-line/on-line and instant debit /deferred debit transactions
• Simple, secure and good low value payments solution (payment below 12.500 Euros)
• Full SEPA Card Framework compatibility (EMV, PCI DSS, etc.)
• High security level (Chip and PIN only, European fraud management, etc.)
• Interesting other functionalities (combined with payment function: loyalty, etc.)
• Ready for new technologies (contact less and mobile payments, e-payments, etc.)
Not surprisingly this initiative, which also offers substantial opportunities for travel and ticketing applications, has received a warm welcome from a large number of large European retailers and petroleum companies, as well as the European authorities. Banks are following this initiative
with great interest and an increasing number of institutions are considering providing PayFair with an OLTB (on-line to bank) payment authorization, as some first users have already chosen to do. The PayFair scheme has private funding, independent from banks and retailers. The proof of concept is currently under development and a pilot is scheduled for Q2 2009. The first countries to launch PayFair are Benelux, Germany, France and the UK, to be followed by Italy, Spain and other Central European countries. The objective is to have pan-European coverage as quickly as possible before going global. Unisys, as system integrator and provider of the solution architecture for the PayFair scheme, is positioned to help support individual airline’s migration to this innovative and attractive scheme.
For more information about the PayFair initiative, visit www.payfair.eu
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