Frontier's old school way of processing in-flight payments sounds like a classic luggage nightmare—the passenger arrives at the destination days beforehand, if not longer.
"In our previous system for processing in-flight payments, we weren't able to get to the transactions until the brick [an early 90s era payment device] was connected to an Ethernet capable port, which isn't available at all airports," said Andrew Brandess, manager of special projects for Frontier Airlines, noting Frontier posted payments at one of the airline's two hubs nationally. "It could take three days or longer to process payments that were made on board. In some cases it could take up to 30 days or longer."
Like a lot of airlines, Frontier is challenged to fill an odd technology gap in a traditionally high tech industry. Travelers can book flights and obtain boarding passes by using smartphone apps, and can buy things in airport terminals using mobile wallets, but are still stuck with older payment technology while the plane is in the air—despite in-flight sales being an important revenue stream for airlines.
Frontier hopes 4G technology will expedite onboard processing, and in recent months has outfitted about 1,300 attendants with 4G-enabled Samsung Galaxy tablets, a deployment that has shown some early promise.
The technology allows attendants to accept payments in flight via a card reader that attaches to the tablet, and then process transactions via a wireless connection when the plane lands. As soon as the payment is recognized on the traveler's bank account, the transaction proceeds, usually in near-real time.
"We're also able to be a bit more dynamic in how we sell and market products to people on planes," Brandess said.
Frontier began giving attendants the Samsung tablets in November, and in that time has reported a 25% increase in revenue per passenger. "We've also added new products, food, or drinks and are able to update the software on the attendant's tablets," Brandess said.
Frontier's early success is a welcome sign for an industry that's been trying to enable digital payments on flights for years. Mastercard tested contactless payments aboard plans as early as 2011. U.S. Bank has developed a digital payments system that allows pilots to combine payments with other tasks. And among airlines, JetBlue supports Apple Pay on certain flights.
"Airlines don’t want to handle cash and when it comes to passengers paying with plastic, airlines have seen that consumers are willing to spend more money," said Michael Moeser, director of payment for Javelin Strategy & Research, adding this has allowed many airlines to raise food and beverage prices in last one to two years and expand their premium food offerings to compete with airport restaurants.
Additionally, airlines have begun to aggressively promote premium content, ranging from simple WiFi and TV access, to selling luxury goods that were traditionally only sold in “Skymall” catalogs and selling duty free items on international flights.
"By raising their game, airlines can no longer to afford to use disconnected (offline) POS terminals that were common just five years ago," Moeser said. "Increasingly airlines want to be able to process credit and debit transactions in real-time or near real-time."
Security is also driving the trend, Moeser said.
"Unfortunately, airlines have been slow in adopting EMV, as have many U.S. retailers," Moeser said, adding an airline-led petition for a two year extension on liability shift was not approved for the air travel industry as it was for the petroleum industry. "Lack of EMV hardware has started to shift fraud liabilities to the airlines which is driving their interest in new POS terminal hardware."
The trend toward in-flight mobile payments is also attracting technology companies, such as CellPoint Mobile, which is working on technology that uses a virtual card number that's designed only for use in flight and allows the consumer to securely connect with the plane's wireless network to make payments.
Terminal manufacturers such as GuestLogix and TouchStar Technologies have also realized that airlines need to have an integrated capability to market to consumers, track sales, replenish inventory, etc. all from a single solution, Moeser said.