THE pandemic has seen a sharp rise in consumers opting to buy first and pay later due to the current economic uncertainty, and these flexible payment options are driving consumers to travel.
Pay When You Fly (PWYF), a new research by Amadeus, states this is the “most appealing payment option” for travellers due to the impact that ‘refund uncertainty’ is having on traveller confidence and bookings during 2021 as the industry begins its recovery.
According to the study, 81% of travellers confirmed that the increased risk of cancellations due to the pandemic is a barrier to booking travel this year, listing refund uncertainty (46%) and the inconvenience of the refund process (38%) as top concerns when a flight is cancelled.
PWYF is favoured by 39% of travellers surveyed, compared to traditional pay at booking (36%), while 24% opted for Buy Now Pay Later (BNPL) schemes that require the traveller to enter a credit agreement with a third party fintech company for the entire balance.
Amadeus described PWYF as “a novel payment option” as the traveller pays only a small deposit, about 10-20% of total cost (non-refundable if the traveller decides to cancel), to make a reservation. The balance is then settled shortly before the flight departs, minimising the risk of cancellation.
“Unlike BNPL the traveller does not enter a credit agreement and is not liable to pay the entire balance, instead they forgo the deposit in the event they decide to cancel,” said Amadeus. Additionally, in the event of cancellation the airline is not faced with a high number of refunds to process because the bulk of the traveller funds remain with the traveller until the last minute.
If airlines offered a PWYF option, 62% said they would be prepared to book travel in summer 2021. They stated the benefits as “no need to go through the refund process ” (43%) and “the money stays in my bank until I travel (38%).”
Apart from instilling confidence by overcoming refund uncertainty, PWYF could boost industry revenues with travellers willing to spend 36% more per trip on average. 49% of travellers said they would be more likely to purchase an ancillary service like a meal or airport transfer when using this payment option, compared to just 6% less likely to do so; 45% would purchase seat selection while 41% meals and 38% larger baggage allowance.
A number of European airlines are taking proactive steps to overcome refund uncertainty through innovative new payment options. Lufthansa has a ‘Pay as you fly’ option allowing passengers on intra-European flights to book their tickets without prepayment. Malaysia Airlines in the UK has inked a deal with British fintech Fly Now Pay Later to offer consumers a more flexible way to finance travel.
Nicolas Ortiz, head of payment product incubation, Amadeus Payments, said: “We’re entering a critical phase for travel’s recovery, and our industry needs to build confidence at every opportunity. We believe PWYF will drive traveller confidence, encouraging travel planning and booking even in an uncertain environment with changing government restrictions.
“The new approach may also result in higher value bookings because travellers only need to make the balance of the payment when it’s clear the flight will depart as planned.”
The study was carried out by Opinium during May 2021 based on a survey with 5,000 travellers from France, Germany, Malaysia, the UK and the US.
Download the Pay When You Fly report here.
• Featured image credit: surasaki/Getty Images
