Given the time-dependant nature of selling within the onboard retailing environment and relatively low transaction prices for general concessions, the passenger travel industry will soon prove to be an ideal beneficiary from the rapidly expanding adoption of contactless payment cards.
In-flight retail profitability is in direct proportion to the time available to transact sales. Discounting ground time, initial ascent and final approach, it is estimated that the average passenger flight has a sales window of 113 minutes. Maximizing flight attendant ability to transact within this limited sales opportunity window could have a substantial impact on increasing passenger conversion rates. Increasing transaction speed is therefore a critical component to increasing in-flight sales.
Along with a tight time window, the time it takes to process each sale is of great impact as well. Given current distribution of sales transaction types, it is estimated that the average onboard sales transaction takes 27.9 seconds. The estimated processing time for a contactless payment onboard is 7.5 seconds. This represents a 73% reduction in average transaction processing time in markets such as Hong Kong and Singapore where contactless payment cards have been adopted ubiquitously. In North America, this would represent a 43% decrease in transaction processing time at near term contactless card adoption levels.
The full benefits of contactless payments are applicable to virtually all onboard food and beverage purchases. Quick Service Restaurants (QSR) classified credit card merchants such as airlines are not required to ask for a signature for transactions under 25 dollars. Within the onboard retail marketplace, 94.3% of food and beverage transactions processed are below this amount.
Additionally, contactless payments could help fill the “price point gap” which has resulted at carriers which have transitioned to cashless cabins. Some passengers can be skeptical in using their credit card for a single item or low cost transactions, which have historically been paid for in cash. Because of this, some airlines have abandoned the sale of very low cost items such as headsets. Contactless payments have the potential of erasing these efficiencies by directly increasing passenger propensity to purchase and allowing carriers to once again sell low cost items in a cashless environment.
A survey conducted by MasterCard shows that 77% of people who are issued a contactless card use it as primary form of payment for transactions under 25 dollars. Visa PayWave, AMEX ExpressPay, and Mastercard PayPass have been exponentially growing their number of issues worldwide in an effort to replace cash which still dominates the small payments retail sector.
The United States lags far behind much of the developed world in terms of contactless card circulation per capita, however this is expected to change in the very near term. Currently, it is estimated that there are 56 million contactless payment cards issued in the United States. Studies at GuestLogix and Aberdeen Research Group project these issues to grow to 109 million by the end of 2011. This equates to 44.8% of US cardholders.
The adoption of handheld POS devices with contactless functionality can be made available through upgrading current models or wholesale purchases. The foresight will allow airlines to meet their passengers’ upcoming preference while retaining and increasing profitability onboard.
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