The recently announced partnership between Amadeus and Uplift is an opportunity to talk about what seems to be an inevitable and necessary revolution in air travel: the possibility to book your flight and pay later.

Amadeus and Uplift

For those who are not familiar with the way airlines work, Amadeus is what is called a GDS (Global Distribution System) and to put it simply, it is a solution used by the travel industry and therefore the airlines to sell their tickets and related services. When you go to a travel agency the agent will use the airline’s GDS, when you buy a ticket online the website is connected to the GDS etc. The GDS acts as a sort of intermediary between the travel agency, the website and the airline’s reservation system.

As for Uplift, it is a business that offers a “Buy Now Pay Later” (BNPL) service that allows travel companies to offer their customers to book a ticket and pay it later.

The partnership between Uplift and Amadeus allows players who use the Amadeus payment module to offer this convenience to their customers.

This partnership is only valid today in North America and we will see why later.

The challenge of the BNPL for the airline industry

According to some studies it is said that 70% of travelers would spend more on travel if they were offered to pay later and this is not surprising. It is therefore by definition something that the airlines have an interest in offering to their customers.

Moreover, you have certainly noticed how ticket prices have increased in 2022 and there is no indication that this trend will be reversed in the near future. And there is a risk for the airlines to lose customers if they can’t offer them financing options.

And why shouldn’t buying on credit, which is a fairly common option for many goods, also become a possibility in the travel world?

All these reasons explain why we see “BNPL” initiatives multiplying. Well, mainly on the North American market.

How does the BNPL work?

To understand how the system works we will start with the example of Uplift. Uplift works like a credit card, well a “real” credit card like the ones used in the USA, not what exists in France and is unfairly called a credit card when it is only a deferred payment card.

So the customer buys his trip and chooses Uplift as his payment method. Then, as with a credit card, he chooses each month to repay all or part of it and of course pays interest on the amount not repaid. Uplift offers an “Autopay” function to schedule monthly payments and avoid increasing your debts and paying excessive interest.

Beforehand, the customer will have created an account on Uplift and will have provided a certain amount of information that will make it possible to decide on the payment limit and the interest rates applied.

Indeed, Uplift is only an intermediary between the customer and the credit institutions! That’s why the service only works in a few countries today.

In the U.S. with a person’s social security number a business has access to their “Credit Score” which is calculated based on your credit history, repayment terms and other factors. Based on this, Uplift will offer you a personalized interest rate.

Such systems do not exist in all countries (e.g. France) and moreover European laws against overindebtedness are often much more restrictive on the granting of credits than what exists in the USA and we will not complain when we see what disastrous situations this can lead to.

And one may wonder if this system is exportable to all countries.

What European options for BNPL?

We can think that to develop in our countries a different approach is necessary. And here we spontaneously think of Alma, a startup specialized in split payments which is very successful with e-merchants.

Coincidentally, it was while I was rereading the draft of this article that I learned that Alma had been chosen for the implementation of split payment at the SNCF.

Alma offers monthly payments in 1 to 4 times, 5 to 12 times (the offer seems to be in the process of being launched) and “Pay Later” at D+15 or D+30.

The cost of payment seems more in line with local practices.

Indeed, the interest rates at Uplift vary from 0 to 36% depending on the buyer’s profile. I might as well tell you that the people who need this type of service the most are the ones who are most likely to end up with an unsustainable interest rate.

Alma offers several options to the seller: to offer a “x times no charge” or to share the cost. In case of cost sharing the interest rate paid by the customer never seems to exceed 2.2% (rate for a payment in 4 times, it is 0.7% for a payment in two times).

We are not talking about the same thing at all and the approach of a business like Alma seems to us to be much more “culturally” compatible with countries like ours where people are less accustomed to living totally on credit and getting into debt at astronomical rates for consumption. And where moreover the thing is very regulated in order to avoid it.

Alternatives to BNPL?

It is clear that the North American style BNPL is in fact only a simplified consumer credit which will have difficulty from a legal point of view to be established in many European countries. It’s not for nothing that the authorities are looking closely at Apple’s future offer and even Alma to ensure that fractional payment solutions do not become a disguised credit.

So while we’re on the subject of split payments, you should know that there are already options available for the European traveler.

For example, the airlines that offer payment by Paypal can offer 4 times without charge. But the amount is limited to 2000 euros.

For French Air France customers, there is also the American Express Air France card which offers payment in 3 installments without fees for all payments made to Air France-KLM. While co-branded credit cards are not very successful here due to the lack of consistent benefits to offer (but also because the cost to the customer does not fund those benefits), this split payment option is a great reason to sign up for this card!

BNPL and cultural bias

There is no doubt that being able to spread their payments would be appreciated by customers and would be a huge business enabler for airlines but, as you read above, it doesn’t seem that a global approach works in all markets.

Once again, North Americans have a culture of credit and debt (even over-indebtedness) that does not exist here.

To the request of the customers to be able to pay later, we see the diversity of the answers: some propose a loan with interests going up to 36% and the others a split payment with 0 to 2% of interests. And the authorities here would never leave the consumer at the mercy of a 36% credit available in one click! In one case you can never repay as long as you pay your interest (and the day you can’t the bailiff rings the doorbell) in the other you are limited to 4 times and the 5 to 12 times is explored with caution

And besides, if Uplift works more or less like a credit card, what is its interest for the American customer who already has a dozen credit cards in his wallet? Perhaps for those who are at the end of their capacity and therefore more likely to end up with an unsustainable rate? We can think so.

So if the BPNL corresponds to a real demand, we do not think that the way it exists today is exportable to all countries.

We are thinking more of developing fractional payments within a limited framework (4 times?) with a minimum of charges, which is much less risky and costly for the customer but which, of course, enriches the credit organizations much less.

But as much as we like to fly, we have to open our eyes: taking out a 20% credit for an airplane ticket that will be paid back in maybe a year is simply a mistake and something that nobody should ever do.

Bottom line

Buy Now Pay Later” is a solution that can only become more widespread in air transport. On the other hand, the way it will work will have to be adapted to local rules and cultures and this is not the case with the solutions that are currently in vogue overseas.

Image : buy now pay later by panuwat phimpha via Shutterstock