The 2017 Imperative for Global Airlines By CellPoint Mobile

The 2017 Imperative for Global Airlines: Beyond Mobile Payments to Personalization, Loyalty & Revenues

Outlook 2017

Supporting Mobile Payments is the First Critical Step

To Generate New Revenues and Position Airlines

For Rapid, Unprecedented Mobile-First Growth & Operations

By Kristian GjerdingCellPoint Mobile CEO

© Copyright 2016 CellPoint Mobile

TABLE OF CONTENTS

3. Executive Summary

5. Mobile Booking & Alternative Payment Methods: Revenue Creators

7. Mobile Booking & Loyalty: A Revenue Connection

9. Conversational Commerce: Mobile Communications via Video Capabilities & Technology

12. Blockchain's Potential in the Mobile-Centric Travel Sector

14. Mobility in Action: The New Passenger Journey

16. Conclusion

The Mobile Payments Imperative for Global Airlines: 2017 Outlook | www.cellpointmobile.com / 3

EXECUTIVE SUMMARY

As global airlines begin to embrace mobility as a way to generate new revenues by making it easy for passengers to pay from their smartphones, they are setting the stage for an infusion of mobile data that can transform other aspects of airline interactions, transactions and operations.

Airlines and travel companies can leverage payment data and other data from the mobile environment to launch a broader, more powerful mobile-centric strategy, but they must do so quickly because of the rapid pace of change, innovation and passenger demand in the travel market.

By baking mobile-first strategies and processes into the brand DNA, airlines can keep pace with industry-driven mobile innovation, capture new revenues from $800 billion in worldwide digital travel sales expected by 2020, reshape and enrich their loyalty programs, explore blockchain-supported capabilities to make travel easier and more secure, and position themselves for their increasingly important mobile-focused Millennial customers.

But they must do so quickly and comprehensively if they are to emerge as passengers’ full-service "mobile-first travel companions." This 2017 Outlook Report examines current airline trends and challenges for airlines and travel companies as they face their mobile-centric passengers and a mobile-first marketplace.

$800 billionworldwide

digital travel

Mobile-first flyers

Millennnials' influence

Chat and video capabilities

Omni-channel demands

Hundreds of APMs

INTRODUCTION

Now that airlines are beginning to embrace the need to generate new revenues by enabling mobile payments for their passengers, market demographics and market innovation demand that they move much more quickly and comprehensively to embed mobility throughout airline operations and the entire passenger journey.

Today’s airlines and travel companies face a market in which innovation is driven externally. The ability to support a range of mobile transactions for their mobile-first passengers will soon emerge as a critical, defining brand characteristic. In this new travel market, the push for mobile-first strategies and brand DNA must start in the executive suite and filter throughout the entire organization if airlines hope to keep pace with a fast-moving mobile market and its revenue potential.

Emboldened by a mobile-centric strategy, airlines will be able to attract more passengers, create more opportunities and paths to purchase, cater to a younger, mobile-focused customer, re-energize their loyalty programs and position themselves for success in the mobile environment.

Surrounded by mobile capabilities, passengers will be able to shop for and buy travel products and ancillary services before, during and after their trips, verify their travel identities, communicate with airlines in a variety of new and engaging mobile formats, and interact with frequent flyer and loyalty programs.

This report looks at the powerful imperative of mobile-first strategies for payments, loyalty, operations, interactions and airlines' ability to cater to customers who arrive with high expectations.



Mobility, Millennials and Alternative Payment Methods (APMs)

For airlines and travel companies, numbers and demographics describe the challenge of operating in a marketplace as its shifts in real time toward mobile.

Today, 83% of passengers travel with mobile devices (SITA), and more airline searches and bookings are being made on smartphones and mobile devices.

Much of that shift to the mobile environment is led by younger travel customers who are entering the marketing and bringing their smartphones – and expectations – along for the trip.

The first generation to grow up steeped entirely in Internet access and mobile technologies, Millennials (19-35-year-olds in 2016) adopt new mobile products and services more quickly than older generations.

Paying from a smartphone is quickly becoming the norm for them. For everyday purchases – whether lattes or airline tickets – they expect friction-free checkouts from APMs and payment innovators such as Android Pay, PayPal and easy-pay capabilities from American Express, Apple Pay, Samsung Pay, Amazon, Visa and MasterCard. Several hundred APMs already operate around the globe, and their number is sure to increase in coming years.

Millennials represent an enormous, trend-setting demographic that brings tremendous spending power as well. Boston Consulting Group notes that “although members of the Millennial generation are not yet the core customers of airlines, hotels, and travel companies, they will be in five to ten years, when they enter their peak earning, spending, and traveling years. In fact, their spending on business flights is projected to grow sharply in the next several years, reaching nearly 50 percent of the total by 2020 or so and remaining strong for the 15 years after that.”

Airlines can and must build the mobile foundation now to give them the flexibility to meet the needs of their current customers and be ready for mobile-first future customers.

Some of the quickest and most strategic steps that airlines can embrace as they build their mobile payment capabilitiesinclude:

Support a range of APMs. Maximizing conversion rates is key to implementing a successful mobile strategy for mobile-first Millennials and the expectations they bring to the travel market. Airlines must choose a mobile-first payment service provider (PSP) platform that supports a suite of next-generation APMs, insulating the airline from resource-intensive, one-off integration projects.

Leverage frictionless payment capabilities from APMs. Pursue mobile push notifications for ancillary products and services to encourage on-demand payments and impulse purchases, and then make it easy for passengers to pay within the mobile channel.

Harness the buying habits of the mobile-first Millennial. According to Hospitality.net, 46% of mobile-first Millennials buy travel-related products via smartphones or tablets, and they prefer seamless in-app purchases. They expect to be able to store their payment credentials in a central location, such as a smartphone or app, ensuring merchant access to their data and negating the need to enter data into lengthy forms or screens.

For airlines, the message is clear: make it easy for mobile-first Millennials to engage on their terms, offer a range of payment methods, and support a range of mobile devices throughout the world. Engaging at the mobile level with this key market demographic will support a variety of travel activities, including booking and the sale of ancillary products and services before, up to and on the day of travel.

"WOULD YOU LIKE TO

UPGRADE TO FIRST CLASS?"


MOBILE BOOKING & LOYALTY

A common piece of advice in the travel business today urges airlines, hotels and travel companies to adapt their loyalty programs and frequent-flyer programs to the mobile environment.

Because of the dominance of smartphones, however, perhaps it’s time to turn that thinking around and rebuild loyalty programs from the mobile ground up. Doing so can enable airlines to take advantage of the mobile channel and the revenue potential from high-value frequent-flyer and loyal passengers.

Two factors make the mobile channel unique during travel: intimacy and necessity.

For many passengers, a smartphone or mobile device is often their primary connection to the rest of the world as they travel. It is immediately available for online searches, communication, notifications, last-minute information and status updates about what's happening.

For airlines, the mobile channel is the most intimate and flexible way to interact with today's customers and passengers, and in some countries, it is becoming the primary channel for travel interactions.

According to Phocuswright, 60% of 2017 gross travel bookings in China will be made on mobile devices, and mobile-first commerce growth is occurring in India, Scandinavia and elsewhere.

Smartphones and other mobile devices can serve as powerful channels for building customer loyalty, whether through delivering the exact information a passenger needs at the exact minute he/she needs it, or by delivering a personalized offer at just the right time for just the right purpose.

From information provided at sign-up and through ongoing interactions with a frequent-flyer or loyalty program, airlines can fine-tune and personalize the loyalty experience, and they can capture revenues throughout the passenger journey – predicting, planning, booking, checking in, boarding, on board, at the destination and post-trip. Airlines can convert "lookers into bookers" through loyalty offerings, and they can then convert those bookers to loyal customers.


Stored payment data

Mobile payments

Frequent flyer program

Personalized messaging

Real-time offers

Loyalty expert Colloquy reports that 71% of travelers would like to book flights and hotel rooms via their smartphones. Given that the bar has already been raised, airlines can re-think loyalty and frequent flyer miles from a mobile point of view.

Build loyalty around mobile, not vice versa: It's time to turn loyalty strategies on their head. Loyalty programs should be centered on the mobile ecosystem, and a host of legacy loyalty patterns and practices – plastic membership cards, for example – can be phased out.

New members can enter and be authenticated into loyalty programs from the mobile channel first. Embedding loyalty into the mobile device can make transactions, sales and interactions intimate, seamless and satisfying.

Personalize the mobile experience: Create mobile apps that work for program members. Loyalty program apps should store members' program details, contact information, preferences, travel habits, and purchase and behavioral histories. For members, the app should be a tangible sign that the airline exists to serve, and not just sell.

Invest in a mobile-first platform: Access to the robust and always-evolving mobile market-place is a must, and airlines need mobile-first platform infrastructures that can help them adapt, integrate and change with the market and innovation. Needed components include easy integration to the mobile environment, personalization capabilities and predictive data analytics.

Leverage Loyalty to Address Capacity: With an average of four new aircraft entering the market each day, and with airline load factors at a record-high 80% in 2016, according to the International Air Transit Association (IATA), airlines face the challenge of filling new seats. Aircraft manufacturer Boeing estimates that the number of single-body and wide-body craft in the skies will double in the next 10 years as part of airline replacement plans.

The mobile channel, combined with mobile-centric loyalty programs, can help customers book their tickets directly from the airlines – which they prefer to do – and can help airlines capture revenues and fill seats. Last-minute offerings and geo-location services in the mobile channel can help airlines increase yields and drive more revenues by making it as easy as possible for passengers to find, book and pay for their flights directly from their smartphones.

Reshape Travel Loyalty Programs for Mobile Commerce and Revenues


Mobile is quickly becoming the primary channel through which passengers interact with airlines, travel companies and brands. As a result, the mobile environment is also rapidly becoming a major focus of airlines' direct-channel, digital communication strategies.

In 2015, some 43 trillion mobile messages were sent globally through social networks and mobile devices, according to Juniper Research, with traffic expected to reach an astounding 438 billion messages daily by 2020.

At this crossroad, the challenge for airlines is simple but critical: leverage those steady streams of mobile communications for travel-related interactions and transactions.

CONVERSATIONAL COMMERCE: Mobile Communications via Video Capabilities & Technology

"WOULD YOU LIKE TO PRE-ORDER

A MEAL FOR YOUR FLIGHT?"


CHATBOTS: NEW DIGITAL COMMUNICATION TOOLS

Messaging apps, or chat apps, boast a number of distinct characteristics that make them appealing to airlines, including their proliferation, retention/usage rates, and important user demographics. Combined with advances in artificial intelligence, the popularity of messaging apps has created a new generation of configurable marketing tools that enable airlines and brands to communicate with their mobile-first customers in new ways at reduced costs.

Chatbots rely on artificial intelligence software that can "converse" with humans to answer simple questions or provide basic information. They can be configured into other popular messaging apps, such as Facebook Messenger, WhatsApp, Telegram, and Slack. The scope and complexity of a chatbot is determined by the developer’s algorithmic aptitude and the airline’s innovation threshold.

United and Alaska Airlines, for example, have used chatbots for several years as part of their digital toolkits. Chatbots.org notes that United's chatbot answers 75,000 questions a day for passengers. Likewise, KLM has integrated chatbot capabilities via Facebook and WeChat.

One video = 1.8 million wordsForrester Research indicates that a one-minute video is worth 1.8 million words. Imagine that. Today's customers demand that their services and interactions have both a look and a feel, and video can play a big role in meeting that demand for communications that both capture customers' attention and support transactions. Strategically placed videos in the mobile environment can extol the value of airline services and products, bringing them to life in a way that clearly differentiates them and drives the sale. A short, targeted video, for example, can feature an airline ancillary product (new menu item, beverage, comfort item), aided by the ability to purchase it through the airline's mobile app.

Moreover, chatbot and video synergies can support a variety of interactions and revenue-generating activities in the mobile channel. With high-performance video targeting and chatbot capabilities, airlines will be able to deliver the most relevant messages to the most relevant audiences, based on their device, time, location and preferences.

For example, chatbots can be programmed to deliver a targeted, location-based video in real time. Would a high-value, loyal customer in coach respond to a short chat message or video offering a day-of-travel upgrade to first class? Does a family traveling with children need to check more baggage at the last minute?



Airlines should keep these strategies in mind as they explore and embrace expanded communications and transaction capabilities in the mobile environment:

Choose the right mobile-first digital platform. Select an infrastructure that integrates with the payments ecosystem and loyalty programs, and provides best-in-class messaging capabilities (including chat bots and video services) so that communications can be personalized and converted to sales.

Deliver the right information at the right time. Chat and video communications delivered in the mobile environment should feel like a helpful personal assistant, especially on the day of travel. A rich interactive experience that delivers the right message at the right time to the right person is the foundation of successful mobile marketing. To achieve success, airlines need a compelling, content-rich, conversation-driven marketing strategy.

Leverage payment technologies, such as pay-by-link, stored payment capabilities, and emerging alternative payment methods, such as Android Pay and Apple Pay, to make mobile interactions seamless and satisfying from these types of chat and video capabilities.

Measure & Manage: As with any successful customer-facing strategy, measurement is critical. Leverage data to measure critical touchpoints, such as meaningful engagement with chat, video and other types of messaging and content. Are passengers responding to messages? Which messages and pieces of content are most effective? When do passengers engage? How frequently do they engage? How can content be optimized to deepen engagement, improve results and drive more sales?

The incorporation of chat and/or video engagement is not meant to replace an airline's direct-channel marketing strategy. Instead, chat and video can extend an airline's presence while further strengthening passenger relationships that create connections, deliver new revenues and deepen brand loyalty.

"Would you like to receive updates about your flight via Messenger?"

"Your flight is now boarding. Take your boarding pass to Gate C-7. See you on board!"

Passenger: "Can you change my seat to the aisle?"

Chatbot: "Your seat has been changed to 13C. Enjoy your flight!"

BLOCKCHAIN'S POTENTIAL IN THE MOBILE-CENTRIC TRAVEL SECTOR

Blockchain processes, which grew out of a need to verify transactions involving Bitcoin and other cryptocurrencies, have great potential in the travel sector. Relying on public and private ledgers to verify and authenticate everything from payments to stock trades to supply-chain deliveries, blockchain processes can also be put to use to make travel easier for passengers.

How would blockchain materialize for airlines and travel companies?

Blockchain holds great potential, for example, in its ability to create a unified passenger ID from existing but disparate data and records – distributed identities that include government-issued travel documents (passports, visas, IDS, licenses), company data, airline and travel records, loyalty program memberships, payment data, and more. A verified digital identity could follow a passenger from beginning to end of a trip, with fewer interruptions or repeated requests for the same data or information.

In the loyalty sector, blockchain has the potential to streamline and verify the earn-and-redeem processes involved in airline and travel loyalty programs. Blockchain applications could make it easier for passengers to authenticate and use their hard-earned miles and points, while protecting airlines and loyalty programs from fraudulent manipulation, hacking, cybersecurity threats, theft and other forms of loyalty program fraud.

On the payments front, airlines can rely on vendors' configurable platforms to integrate and update basic blockchain processes, digital wallet blockchain payment processors, and other payment-related services without massive integration efforts or internal disruption. Because the mobile environment changes and evolves so rapidly, it behooves airlines to rely on partnerships with industry innovators who can help them bring products to market quickly and profitably.

Within airlines, blockchain technologies can be supported and integrated from an underlying e-commerce orchestration platform. As the blockchain universe evolves within the travel sector, integration of new products and services can be handled easily, without massive integration or implementation projects.


Blockchain products should be considered, explored and integrated if they:

Make travel easier for passengers, airlines and transportation companies

Enable airlines and travel companies to bring new products and services to market quicker

Reduce fraud around mobile payments and loyalty program transactions

Streamline and reduce the number of repeated data requests that occur during the travel journey

Leverage mobile capabilities for new innovative travel business services and travel solutions

Security Passenger IDs Payments Loyalty programs


On a morning commuter train, laptop-equipped Mary searches for and finds the perfect itinerary for an upcoming business trip. Her preferred airline offers a same-day early morning departure and a late-night return flight.

As she approaches her station, she saves the search, closes the laptop, exits the train and switches to the smartphone for her walk to work. As soon as she opens her smartphone, the airline’s mobile app recognizes her laptop-initiated

itinerary. She receives a push notification offering the best fare available for her chosen itinerary. Because her payment

data is pre-stored in the app, she books the flight and purchases the ticket with a one-click payment process on her smartphone.

Several minutes later, another app message notifies her of the availability of lounge access and limousine service on the day of her trip. Using either Apple Pay or Android Pay, also pre-stored on her smartphone, she purchases both ancillary services.

On the day of the trip, a block-chain-supported verified passenger ID app speeds her passage through airport security in a matter of minutes.

Because her payment data is pre-stored in the app, she books the flight and purchases the ticket with a one-click payment process on her smartphone.

On a morning commuter train, laptop-equipped Mary searches for and finds the perfect itinerary for an up-coming business trip. Her preferred airline offers a same-day early morning depar-ture and a late-night return flight.

As she approaches

MOBILITY IN ACTION: The New Passenger Journey

How would a typical travel scenario play out if airlines positioned themselves as “mobile travel companions” to their passengers? Here's one example:


Conclusion

Driven by market demand, mobile proliferation, rapid third-party innovation, growing expectations and market demographics, airlines and travel companies face the challenge of reshaping how they operate and succeed in a new mobile marketplace.

Enabling passengers to pay for tickets, services and travel products from their mobile devices is a first step toward mobile-centric operations and revenues.

With directives that start within the highest levels of the executive suite, airlines and travel companies must quickly begin to infuse mobile-first strategies throughout other business services so that loyalty programs, passenger interactions, passenger transactions and ancillary sales can serve passengers well and capture new revenues from the mobile marketplace.



About Kristian GjerdingAs Chief Executive Officer of CellPoint Mobile, Kristian Gjerding leads the mobile payments firm as it helps airlines and travel companies around the world deploy mobile-first payment and e-commerce solutions in a marketplace that is shifting rapidly to the mobile environment.

For more than a decade, Gjerding has helped shape the payments ecosystem by helping global airline, payments and trade organizations establish best practices and standards around NFC communications, mobile payments and remote payments, including advisory roles with the International Air Transport Association (IATA), Mobey Forum, National Retail Federation and others. He also co-leads CellPoint Mobile's Travel Innovation Hub.

About CellPoint MobileTravel is at the heart of discovery, learning, commerce and change. It’s also at the heart of our business, and that’s why CellPoint Mobile makes travel easier by providing airlines and travel companies with comprehensive, mobile-first commerce and payment solutions that enhance their customers’ experience, increase revenues and improve margins. With offices in Miami, London, Copenhagen, Dubai, Pune and Singapore, CellPoint Mobile simplifies the integration of complex commerce and payment solutions for global and regional airlines and travel companies – quickly and without friction. The company’s Travel Innovation Hub creates blockchain-supported products and services for travel payments, loyalty program transactions, passenger IDs and security.

[email protected]