Ralph Kaiser: UATP CEO On Virtual Card That Bundles Air, Car & Hotel

For six years, Universal Air Travel Plan president and CEO Ralph Kaiser has worked to add hotels and rental cars to its merchant network. What began with a partnership with LaQuinta Inn & Suites in 2010 hadn't gained much traction by 2013, but in August, UATP announced a partnership with corporate payments provider Wex and Delta Air Lines to provide a one-time-use virtual card solution that can package hotel, car rental and air into one payment transaction. Kaiser spoke with BTN’s JoAnn DeLuna about that partnership, why airlines should be wary of global distribution systems' reach into the payment sector, and digital wallets.

Since your partnership with Wex and Delta, how much interest have you received from other airlines?

Everyone is interested in it and not just in the U.S., either. It just worked out that Delta was able to work with Wex in the U.S. to launch [in the fourth quarter]. Our issuer base is 33 airlines, and the majority of active issuers who have big corporate programs are interested in this. Anytime the airline talks to a corporate and says, “Hey when you book a flight on us, you can also book your hotel and car rental and we put it all on the same statement for you,” they’re going to say, “Sure. Why not do it?” They’ll all add it. We just need to get it into the market.

How will it work?

The Wex model is a virtual card transaction on the MasterCard network. If you use a UATP number to book the hotel when you book your air, that UATP number will flip to a MasterCard and be processed on the MasterCard [network], but the data and transaction information will go back to Delta for the customer’s UATP billing statement.

Does the Wex partnership affect your partnership with virtual payments provider eNett at all?

No. In fact, we always tell all the partners that we’re working with multiple companies on multiple fronts to bring solutions to our members, the airlines. We try to be an honest broker for everybody. Unless someone wants to pay us a lot of money, we’re not going to do an exclusive deal. We’re willing to work with anybody that would like to work with the airlines to bring in corporate non-air and benefit from the UATP customer base of airlines and large corporations.

Wex also partnered with data intelligence company Grasp to launch a virtual card solution, which it claims is free. If it is, why would people use UATP?

I don’t understand how they work out the economics ... but companies don’t do things for free. Compared to how it’s traditionally been done and priced, maybe it is free but someone’s paying for it somewhere. Our goal for doing this is not because UATP is going to make profits on the Wex deal. It’s really to make the product better so airlines can go out in the market and solve problems for corporates.

In July, UATP was exploring ways to process onboard purchases, and in September, you announced integration with card management technology provider Givex. How will that partnership benefit the corporate travel sector?

We have some other gift card providers and programs, too, like Air Canada. The cool thing about Givex is that it’s almost like a loyalty program and it can do traditional gift cards, too. But, they also have technology where an airline can reward customers and do things for them. For example, if a traveler is sitting at [the airport] because their flight is delayed. [An airline] can say, “Here’s $20 so you can get a sandwich and drink while your flight is delayed.” You can put it right on the UATP card through the Givex tool. It’s a way to get extra flow revenue through the gift card but also a way to enhance relationships with both corporate and leisure travelers.

There’s a lot of attention on the payment sector at the moment. Why is that? How does UATP see its role in the sector?

Virtual card is the hot thing in payment right now. Also, payment has gotten a lot of attention because, over the decades, airlines have been able to rationalize agency commission costs and have reconciled the GDS costs fairly well. GDSs are now getting into payment. Amadeus has a huge payments group, and there’s eNett and Travelport. [Travelport president and CEO] Gordon Wilson has said his future is in payments. How many heads of GDSs do you hear saying that? Sabre and Travelport recently partnered. All the money that airlines have rationalized and taken out in GDS and airline IT technology savings—[the GDSs] are now going into payment and trying to extract that value back from airlines. The airlines need to strongly consider who their partners are because airlines are in lawsuits with GDSs on the IT side and now [airlines] are going to start handing out business to the GDSs. [Initially, it might be] cheap, and over time it’s going to be very expensive and there will be contract fights. You’ve got the GDS in your IT, and now they’re going to be in your payment. They’re getting more and more tentacles into the airlines. Our company is 100 percent owned by airlines, so we’re trying to educate airlines on what they may be getting themselves into.

The GDS-airline partnerships are interesting. Who owns the data, who’s responsible for keeping the data safe and who’s responsible in the case of a data breach?

Two things work in our favor. One, we work in the business sector, so it’s commercial data, not private citizen data. Those breaches are significant because it’s personal data and liability. Two, we get our data direct from the airlines. We don’t go through other third parties, so all the statement data from the corporate traveler comes directly from the booking, the [passenger name record], and it’s a direct feed to our system to those billings systems, which is the best data, the best source you can get, and it’s the most secure. Of course, we take data privacy and security seriously, but it’s the airline’s data that we process and put on their billings statements.

Where do you store your data?

We don’t really store data, per se. We get data every day in batch transactions. That goes through the acquirer network, which is our proprietary payment network, SITA, an industry-owned tech provider that we run. But we don’t store personal private data. We don’t have it. We have the PNR Level 3 data that we get, [which includes] the name of the traveler, class of service, city pairs, schedule, time, etc. That’s good for travel managers for reconciliation [purposes].

How much data do you want to own?

We don’t have a lot of data issues or questions. We provide all the data from the booking back to the corporate travel manager, TMC or corporate customer through their statement. We run our own proprietary invoicing system for airlines, but some also have their own that’s built into their revenue-accounting system. But in terms of controlling the data, it’s the airlines’ and corporate customers’ data. We don’t do anything with our data except present the customer’s data in a way they can use it to manage their travel. We don’t sell the data. Some companies aggregate and sell data. Some credit card companies buy data from different sources because they can’t get the complete picture in every market. We get it in every market because we’re global, we’re closed loop and we’re directly connected to each airline. We’re integrated in all the GDSs, which I love, except when they try to raise airline costs for payment.

How do you stand your ground when the GDSs come into your territory?

Payment competition—whether it’s from Amex, MasterCard or Amadeus—is good for the industry. It’ll create innovation and lower costs. There are two parts of education to our business. It’s not just being careful with whom you partner but also what you’re paying for it. How much of your business do you want one entity to control? It’s the same reason I don’t buy individual stocks because of companies like Enron. You need to spread your risk. You never want to have a concentration of risk in service providers and customers. If an airline gives the reservation system, IT platform, GDS connectivity, payment and website to one company, you have this concentration of risk. Also, how do you negotiate contracts when someone has all that business? Look what Amex does in the U.S. with payment and agency stuff. Airlines are afraid to cross them on one piece because they know they’ll suffer on the other.

The other part is that we bring alternative payment brands to the airline industry—for example, PayPal. We process the transaction on the back end, but the customer doesn’t see it and we don’t charge the airline for that [service] because we’re owned by airlines. It’s part of our service to them. We get a processing fee from anyone who does alternative payments, not the airlines. The GDSs and [payment service providers] will charge the airline. Education is key, as we need to get that message out. If you’re using a PSP, we don’t think the reconciliation is good and we know that the price isn’t as good.

Where is the industry headed?

It’s very exciting. The solutions coming out are important not just for the payment industry but for airlines who are the biggest merchants in the world. Everyone wants an airline to accept their form of payment because they’re big-ticket items. We’re starting to see a bit of consolidation in payments, too, not just in airlines. Again, that’s another control thing. If your options go from five to two and one of those two is a GDS, do you really want to put your eggs in one basket? Companies like PayPal are evolving. They were the leader and the first alternative payment brand, and they did really well because they took fraud seriously when others didn’t. Mobile payment is coming. Apple is there. That’s a sexy brand name. We know what Uber has done in transportation. Uber is a way to pay for a taxi, but you don’t care about the form of payment; you care about the service. People don’t care what payment is embedded in there.

Some of the criticism I’ve heard from buyers is that not enough merchants accept mobile wallets like Apple Pay.

I don’t know how that will be adopted or not, but Apple revolutionized the way we listen and buy music, and now maybe they’ll do the same thing in how we buy things. The other thing on mobile payments is the [International Air Transport Association’s] EasyPay. It’s going to be a new proprietary form of payment, an e-wallet … a way to move cash more securely and quicker in the IATA [business service provider] network, which is a global network and which we’re 100 percent connected to. It’s another innovation in the airline industry that may change things.