Eye on Acquiring: Airlines Seek Ways to Chop Acceptance Costs

Buffeted by strong economic headwinds, U.S. airlines are looking at a variety of ways to slow the seemingly inexorable rise of card-acceptance costs, as borne out by two separate developments in recent days. United Air Lines Inc. said on Monday it is putting off for up to 60 days a controversial plan to shift card-acceptance costs and responsibilities to a select group of travel agents. The carrier said the extension is available to agencies that request it. And an AirTran Airways spokesperson told Digital Transactions News it decided to become the first airline to accept PIN debit for online ticket sales to provide “security and convenience” to customers. But at the same time the Orlando, Fla.-based carrier should realize cost savings over credit and signature-debit card transactions because of the move. Under United's original plan, revealed in a letter the airline sent to affected travel agencies in June (Digital Transactions News, June 30), some 28 agencies were told they could no longer use the carrier's merchant account effective Monday. The move would have forced the agencies to seek out their own merchant accounts, a step many would have found difficult because most acquirers regard air travel as a high-risk transaction category, experts say. The agents also would have had to assume sharply higher costs for card acceptance as well as responsibility for fraud and chargebacks. The American Society of Travel Agents, an Alexandria, Va.-based trade group, protested United's decision, lobbying both Congress and the Obama administration. At least 13 House members wrote to the airline to state concerns regarding the move's impact on both affected agencies and consumers, according to press accounts. It's unclear whether ASTA's lobbying or the representatives' letters led to United's decision to delay shifting card-acceptance responsibility to the agencies. The airline said the 28 agencies represented a small fraction of the “thousands” that sell tickets for it, and added that more than 100 agencies and online travel sites already use their own merchant accounts to handle transactions for airfare, the press accounts said. But ASTA told Digital Transactions News in June that it feared the move was a prelude to a wider effort to force agencies to assume United's costs for accepting cards. The group was also concerned that United's competitors would adopt similar measures, though none has been known to do so yet. ASTA estimates United's new policy, if applied industrywide, could impose some $171 million a year in acceptance costs not just on its 12,000 members but on all travel agencies, based on an average discount rate of 3%. The trade group says airlines depend on agencies for anywhere from 40% to 50% of their ticket sales. Meanwhile, AirTran announced on Thursday it has begun allowing customers to buy tickets online with their PIN debit cards. The carrier thus became the third merchant and first airline to sign on with Acculynk Inc., an Atlanta-based software company. Acculynk's PaySecure system allows cardholders to enter their PINs using mouse clicks on a so-called floating PIN pad that appears on their PC screens. Acculynk has struck deals with the Accel-Exchange, CU24, NYCE, and Pulse electronic funds transfer networks, though the NYCE connection has not yet gone live and not all issuers within each network have agreed to participate. Acculynk is connected to a switch operated by Universal Air Travel Plan, a processor for most major airlines, but the AirTran deal was arranged through its acquirer, Elavon. Some 75% of all AirTran ticket sales take place online, the spokesperson says in an e-mail message, with payment methods including the major credit cards as well as PayPal and Bill Me Later. While the decision to accept PIN debit should help reduce AirTran's acceptance costs, since PIN debit generally carries lower interchange fees than signature debit, the spokesperson says other factors played a role in the move, as well. “We felt PaySecure offered the best option to provide our customers with a secure and easy payment method using a PIN debit card,” she says. “Our decision was based on security and convenience.”