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Airlines hope new payment options will end 'abandoned shopping carts'
— -- When booking a recent flight on Continental Airlines' website I encountered a myriad of possible payment options. Besides the usual credit or debit card options, I could also purchase my ticket using Western Union, TeleCheck, or Bill Me Later in addition to picking up my ticket at a Continental Airlines Ticket Office, at the airport or by redeeming a Continental Airlines Gift Certificate, Travel Certificate or a Gift Account.
Continental is not the only airline offering multiple payment options these days. American Airlines also has a Western Union option. US Airways also offers Bill Me Later and will soon join Northwest, Southwest, and Midwest Express in allowing airline customers to pay for tickets using PayPal.
Why are airlines suddenly expanding your purchase options? Increasing online sales is the most obvious reason. Scott Stachowiak, Continental's Director of Distribution Planning and eCommerce, cites a study by the research firm Cybersource that showed how increasing the number of payment options significantly drove up the conversion rate of lookers to bookers. "For the online world, that is extremely significant because abandoned shopping carts are a huge problem," Stachowiak told me. "We've got all these eyeballs but we just can't get them to purchase."
Airlines also encourage alternative forms of payment because most such options cost less than traditional credit card transactions. Like all merchants, airlines pay a fee to the credit card companies every time someone uses a credit card to purchase an airline ticket. These fees generally range around 2% to 3% of the ticket price depending on the card, the value of the ticket, and the negotiated deal between that airline and the credit card company. On a $1,000 airline ticket, approximately $20 to $30 of your money goes to the credit card company.
To lower costs, airlines first took aim at travel agency commissions. Next they targeted the booking fees paid to the "Global Distribution Systems" that connect travel agencies to airlines. Now they are poised to tackle the next highest cost in issuing airline tickets: the credit card fee.
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