Financial services Streamlining the financial services
IATA is negotiating the altered payments terrain with significant investments to maintain the relevance of its payment and settlement services—making them safer, faster, and more cost-effective than ever.
The landscape for payments worldwide has undergone major changes, first with the introduction of online payments and, more recently, through the advent of mobile payments. New regulations to keep pace with the evolving technologies have an equal impact on the payments landscape. The European Union (EU)’s Payment Services Directive 2 (PSD2) Application Programming Interfaces (APIs) enable instantaneous payment for consumers.
IATA is negotiating the altered payments terrain with significant investments to maintain the relevance of its payment and settlement services—making them safer, faster, and more cost-effective than ever. The backbone of those services, IATA Financial Settlement Services (IFSS), facilitates payments to airlines from travel agents and freight forwarders, from airlines to airlines, and from airlines to suppliers. In 2018, IATA enhanced the IFSS’s management of credit risk, through the launches of the New Generation IATA Settlement Systems (NewGen ISS) and the introduction of Transparency in Payment (TIP).
Also in 2018, the IFSS, which operates on a cost-recovery basis in accordance with rules agreed to by system participants, processed $466 billion. The vision is to move from its largely conventional processing of payments to digital payments that are 100% safe; 100% instant; and 100% frictionless—meaning zero cost—for all stakeholders. IATA will achieve this vision by leveraging the latest technologies, such as API and blockchain, and by working closely with its industry partners.
IATA settlement systems
IATA’s Billing and Settlement Plan (BSP) facilitates and simplifies the selling, reporting, and remitting procedures of IATA-accredited travel agents and improves the financial control and cash flow for approximately 400 participating airlines. The BSP processed $248.8 billion in 2018 and at the close of the year boasted 136 operations in 181 countries and territories. Their overall on-time settlement rate was 99.997%.
One of the main benefits of the BSP is that it generates significant cost savings for its participants through economies of scale. The greatest benefits, naturally, are delivered to the largest users of the BSP, although no airline to date accounts for more than 6% of total transaction volumes. The 743 million transactions processed through all BSPs in 2018 resulted in an average cost per transaction of $0.07, with the cost of some transactions as low as $0.04. IATA is determined to lower this even further, the aim being to reach zero cost per transaction in return for higher volumes of transactions from IATA members.
IATA’s Cargo Account Settlement System (CASS) simplifies the billing and settling of accounts between airlines and freight forwarders. It operates through CASSlink, an advanced, global, web-enabled e-billing solution. In 2018, CASS processed $37.2 billion and had an on-time settlement rate of 99.996%. CASS featured 92 operations serving 235 airlines, general sales and service agents (GSSA), and ground handling companies at year-end 2018.
The IATA Clearing House (ICH) provides fast, secure, cost-effective settlement services to 445 airlines, airline-associated companies, and airline travel partner participants. In 2018, the ICH processed $62.1 billion and had a financial settlement success rate of 99.999%.
IATA Currency Clearance Services (ICCS) offers global cash management that enables airline treasurers to centrally control and repatriate their worldwide sales. The ICCS is used by more than 320 airlines and is available through over 200 IATA BSP and CASS operations worldwide. The ICCS was responsible in 2018 for repatriating over $815 million from countries with severe currency liquidity issues, such as Zimbabwe; the nations of West Africa, including Nigeria, and of Central Africa; and Trinidad and Tobago. CASS operations globally also supported IATA members in markets where liquidity can be complex and repatriation delayed. Overall, the ICCS processed $39.1 billion in 2018.
IATA’s Enhancement & Financing (E&F) ensures that air navigation service providers (ANSP) and airports have access to IATA’s globally trusted systems and processes for the generation of accurate billing data, standardized e-invoices that can be automatically validated, and secure fund collection. The E&F also helps airlines avoid late payment penalties, reconciliation headaches, and disputes by standardizing the billing process and providing a single point of contact for questions or conflicts. In 2018, the E&F processed $4 billion.
IATA’s Simplified Invoicing and Settlement (SIS) is a cost-effective electronic invoicing platform that removes all paper from the invoicing and settlement of industry services. SIS is streamlining processes by enabling the exchange of electronic data among airlines and between airlines and direct operating cost suppliers. The use of a single messaging standard, the ISXML, simplifies business activity for the industry and allows suppliers to use one invoicing standard for all of their airline customers.
In 2018, SIS had more than 2,483 participants, including 426 airlines, 313 suppliers, and 1,744 other entities enabled as receivers of SIS e-invoices to maximize efficiency on the invoice sender side. SIS processed over 1.6 million interline and supplier invoices and settled $74.82 billion in volume during the year under review.
Since its launch in 1971, IATA’s BSP has eased, secured, and made safe the distribution and settlement of funds between travel agents and airlines. Its rules, however, were established in an era of paper ticket stock, brick-and-mortar travel agencies, limited payment methods, and extensive airline industry regulation. The rules required updating to address today’s business realities, including the increasingly complex risks of airlines and travel agents.
The NewGen ISS was launched by IATA in March 2018 to ensure the continued relevance and value of its BSP to airline and travel agent customers. For airlines, the NewGen ISS means faster settlement, safer funds processing through an enhanced risk management framework, and a lower cost of distribution. For travel agents, the NewGen ISS offers more products and services, greater flexibility, and new and more cost-effective solutions.
The NewGen ISS is built on four pillars that enable it to best serve the needs of airlines and travel agents:
- It offers three levels of travel agent accreditation and the ability for agents to select the level that best suits them and to move between levels as their businesses evolve.
- GoGlobal Accreditation is a “one-stop shop” for agents with operations in multiple BSP markets. Multicountry agents will be able to accredit all of their locations worldwide under a single passenger sales agency agreement.
- GoStandard Accreditation corresponds most closely to the accreditation specifications in place at this time and is for agents operating in a single country.
- GoLite accreditation is “entry-level” accreditation and involves tickets issued with IATA EasyPay or a customer card.
- It features a modern risk management framework that ensures enhanced security for its participants, including a remittance holding capacity (RHC) for cash sales outstanding to the BSP.
- It encompasses IATA EasyPay, a new, voluntary e-wallet solution for travel agents’ issuance of airline tickets in the BSP. IATA EasyPay provides agents with a fail-safe way to continue selling even if they reach their RHC and grants airlines a low cost per transaction and fast settlement. It is also designed for GoLite travel agents.
- It includes Global Default Insurance, a financial security option for travel agents that presents a cost-effective, flexible, and collateral-less alternative to bank guarantees and other types of security.
The NewGen ISS is being progressively rolled out in all BSP markets and has been implemented in some 50 areas to date. The intent is to implement it in markets representing 90% of total BSP cash remittances in 2019 and 100% in 2020.
IATA is also introducing an initiative called Transparency in Payments (TIP). TIP is focused on providing airlines with increased transparency and consent regarding travel agents using their cards for funds settlement. As it stands, airlines only see the payment settlement costs after the fact, if at all. No method of settlement is barred by TIP, but agents can only use methods consented to by an airline.
For airlines, the NewGen ISS means faster settlement, safer funds processing through an enhanced risk management framework, and a lower cost of distribution. For travel agents, the NewGen ISS offers more products and services, greater flexibility, and new and more cost-effective solutions.
Direct Data Solutions
- Direct Data Solutions (DDS) is a game-changing, industry-sponsored program that provides the travel industry with timely, accurate, cost-effective access to global airline market data.
- Participating carriers gain easy access to the most comprehensive global data set, aggregated from such multiple sources as ARC Air Logistics, Inc.’s area settlement plan (ASP) transactions, IATA’s available BSP transactions, and carriers’ contributions.
- No matter what business intelligence you require – network planning to fleet planning, revenue management, sales and marketing, or business and product development – the DDS delivers.