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Delta buckles up with Alipay as airlines tap mobile payments

Delta Air Lines is attempting to entice more Chinese consumers to book with its brand by teaming up with mobile and online payment solution Alipay, suggesting that parent company Alibaba may edge in on other payment options in the airline sector.

The strategy will see Delta become the first United States-based carrier to integrate Alipay onto its Web and mobile site, proving the brand’s ongoing efforts to better cater to Chinese customers. As China continues to become the fastest-growing tourism market over the past ten years, other airline marketers may follow in Delta’s footsteps by adding Alipay mobile payments to their systems, a move that could affect other solutions such as PayPal.

“Anything that helps to reduce the perception of friction in the purchase transaction will impact sales if it’s implemented,” said Thad Peterson, senior analyst at Aite Group, Atlanta, GA. “If a company is going to serve customers in or from China, then Alipay is probably as important as accepting China Union Pay.”

China’s influence
As China emerges as the world’s highest-spending tourism source market, travel and hospitality marketers are sitting up and taking notice. Many brands have found that leveraging mobile is an optimal way to reach these on-the-go consumers.

Millennials and younger demographics of Chinese consumers have tapped the United States as their most desired travel location, providing an optimal targeting opportunity for airline marketers. 1.8 million Chinese travelers visited the United States in 2013, ultimately contributing a total of $21.1 billion to the national economy.

“Payment options are exploding overall,” said Mike Wehrs, head of U.S. operations for Appster, San Francisco, CA. “The Alipay system is a smart move by Ant Financial just as other large companies like Google and others have entered this market.

“Delta has shown great leadership in signing up to accept Alipay as a payment solution for their customers,” he said. “It shows that they are taking local market preferences into account and catering to a market they are clearly focused on.

“I definitely see any move that demonstrates respect and accommodation for local market conditions and preferences as beneficial to their bottom line.”

The United States and China have also eased up on reciprocal visa policies, a move which is likely to spur even more Chinese travelers to visit the U.S.

While many airlines are moving in the direction of offering Apple Pay as a primary mobile payment solution to customers, it would be wise to consider the foreign consumers traveling on airlines and their preferred methods of payment. However, some experts see Alipay as having the ability to thwart PayPal’s popularity.

“The bigger (much bigger) threat is to PayPal,” Aite Group’s Mr. Peterson said.

Growing demand
The Alipay partnership will ensure that Delta will have the capacity to reach the more than 300 million Alipay customers registered in China. These users will be able to pay for their Delta trips via the mobile-optimized via credit and debit cards or bank accounts.

Alipay has more than 200 financial institution partners worldwide.

“China has over one billion people,” Appster’s Mr. Wehrs said. “The reach of Alipay can extend far outside China as well.

“With the amount of consumer touchpoints that Alipay can garner within China alone they have a solution that can get to scale very quickly,” he said. “To compete in the mobile payments space, scale is one of the most critical factors.

“I absolutely see this being competitive to Apple Pay and I also see more payment choices emerging.”

The airline has also been increasing nonstop flights from the United States to China in a bid to become the most Chinese-friendly carrier, and offers local language options for Chinese travelers on its site, inflight entertainment services and self-service kiosks in airports.

Meanwhile, other U.S.-based airlines are rolling out mobile payment options on board the aircraft for streamlined purchase experiences.

JetBlue Airways is bolstering its mobile offerings by enabling travelers to purchase snacks, beverages and upgrades to premium seats via Apple Pay, making it the first airline to roll out this feature and suggesting that more will quickly follow as mobile payments cement their status this year (see story).

“Alipay is a powerful force in payments and a trusted brand in China,” Aite Group’s Mr. Peterson said. “The effort required to implement is lessened as well because UATP is enabling the process.”

Final Take
Alex Samuely is an editorial assistant on Mobile Commerce Daily, New York