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IATA Seeks to Reduce Credit Card Merchant Fees

September 24, 2009 By: George Dooley

Travel agents concerned with the impact of United Airlines' attempts to shift credit card fees to agents have a new dimension of concern as the International Air Transport Association (IATA) announced the launch of two services for airlines around the world to reduce costs and help manage risk associated with credit card operations. IATA represents some 230 airlines comprising 93 percent of scheduled international air traffic.

The IATA CreditCard Optimisation Service (COPS) will reduce commission rates and service charges, improve speed and method of payment, and create a single point of contract for all credit card negotiations. The negotiations will be based on complete audit of all credit card contracts of a participating airline and the results will be benchmarked against a proprietary database to identify gaps, IATA said in a statement. 

“New agreements will then be negotiated with banks to bring greater savings," IATA said. "This unique service is offered in cooperation with CreditCard Optimisation Ltd, back and front office cost reduction subject matter experts, who have achieved significant savings for the airline industry for the past 15 years.”  

The second service announced by IATA is called IATA Perseuss. This is an online database that allows airlines to legally share data about fraudulent credit card transactions. Payment card fraud is estimated to cost the airline industry close to $1.4 billion annually.

Identifying fraudulent transactions is critical to driving down costs, IATA says. The Association is working in partnership with an application developer who provides a secure platform that allows the airline community to upload and share fraud data in an environment that is flexible, clear and scalable. Currently, some 40 airlines are using the service and already contributed over 800,000 data elements.

The projected losses of the airline industry for 2008/09 are estimated at $27.8 billion and IATA is committed on assisting airlines with solutions that will bring cost reductions while increasing efficiencies.  

In a backgrounder, IATA explained the CreditCard Optimisation Service (COPS).

“Credit card acceptance sees airlines paying high merchant fees," IATA said in a statement. "The fees are numerous and vary from country to country. Some are fixed amounts. Some are percentages of the transaction value. Understanding what exactly is being charged is a daunting task. Without a thorough understanding of this complexity, airlines can be exposed to unnecessarily high fees.

“IATA has partnered with CreditCard Optimisation Ltd or COPS, which offers a unique and innovative service to identify and reduce commission fees and service charges," the statement continued. "COPS innovative methods allow to benchmark all fees assessed to a merchant against a proprietary database to define optimal fees. In addition, the IATA CreditCard Optimisation Service will regularly renegotiate card acceptance merchant agreements in order to reduce commission and service fees for the benefit of all industry."

The benefits cited include: substantial reduction of credit card commission rates and service charges, improved speed and simplified methods of payment and single point of contact for all credit card negotiations 

“IATA COPS is a consulting service for airlines," IATA said. "An IATA COPS expert works with the airline onsite to identify all hidden charges and fees. An analysis of the data collected is then carried out offsite, and a report of target savings is presented to the airline. Negotiations with the credit card companies are done by IATA COPS on behalf of the airline. The fee for this service is paid only if the savings are achieved and is percentage based.”


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